I would like to know if an S Corporation can claim a loss despite the Officer (who is a owner of the corporation) taking a salary that is greater than the loss?

Had I not taken a salary, I would be reporting a profit. However, I read in many articles that the officer of an S corporation should be taking a reasonable salary. Accordingly, I took a Salary that resulted in a loss in my S Corporation.

Would these K-1 losses be deductible on my personal tax return?

Thanks..

The loss generated from the S Corporation reported on the shareholder's K-1 is generally deductible on the individual tax return provided there is sufficient shareholder basis to offset the losses.

The fact that you as the officer of the corporation took a reasonable salary that contributed to a loss makes no difference. Clearly, taking a reasonable compensation is always a smart decision. So, provided you have sufficient basis available in the S Corporation, you would be allowed to deduct the K-1 losses on your personal tax return.

These losses would allow you to offset the W-2 income and other income that you received from all sources thus resulting in a lower taxable income, contributing to a lower income tax liability.

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