I own 100% of an S-corporation that had a loss of 20,000.00 in 2013. Throughout 2013 I borrowed about 15,000.00 FROM the business (the money were borrowed in multiple transactions, and I have created all the loan petty paperwork for each transaction, charging my self interest, etc). Instead of paying back the loan in 2013, I invested money back into the corporation (about 7,000.00), which increased my basis (to about 7,000.00). I have not taken a salary in 2013, and I have paid back the 15K loan in full on February of 2014. Does the IRS requires me to pay back the loan before increasing my basis, (by investing those 7,000 into the company)?

P.S I rather have basis into the company to be able to pass some of the loss to my personal income, since my wife and I could use the loss to get a bigger tax refund from her full time job.

#1; IRS requires you to pay reasonable wages to yourself unless your S corp takes losses.



#2;I guess you need to follow the agreement between you and the S corp; the loan from the S corp, as you are personally liable for repayment, you are considered at risk for funds you borrow that are used in the business ; it means it increase the amount of at risk; the at-risk rules deal with your investment in your s corp activity. They are designed to prevent you from claiming losses in excess of amounts you actually stand to lose your investment. Only the amount of your investment that is at risk counts towards your at-risk basis as your tax basis