loan repayment from s corp
I took out a loan from the bank, in my name not the s corps name, not a guarantee loan for the s corp.. I loaned my partner half of the money I borrowed from the bank. We have a loan agreement for him to pay me back. We both took the money and put into the s corp.. The s corp. has been making the payments directly to the bank. We are being audited and the Auditor is disallowing our losses and basis. We have pasted the material participation test. What should we have done? Can the s corp. make our payments? Does anyone have any suggestions? Thanks in advance for any help.