rigsbee wrote:

- quote -

No. Unreimbursed expenses of an employee (even when that
employee also owns the corporation) go on Schedule A in the
Miscellaneous section.

Aside: What schedule C?

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- quote -

Is this the new circular 230 disclaimer?

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Thanks again.

Can't I simply place the expenses on my schedule C? And
then report $0 income and $0 expenses on my 1120S? This is
a small S Corp, just started with no income.

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- quote -

By making the capital contribution, you have basis in the
corporation to the extent of your contributions. The corp
can have expenses without income, creating a loss. On your
personal return, you can deduct the losses (provided they
are non-passive) to the extent that you have basis in the
corporation. If the losses are passive you first have to
have basis and then have passive income in order to take the
passive losses.

If you don't need to capitalize your costs as start-up
costs, you would most likely get to take a loss on your
personal return equal to every legitimate business expense
claimed on your S Corp return.

There is no special form for your capital contribution. You
just make a journal entry on your corporate books to DR the
expense or capital asset and CR additional paid in capital.

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"rigsbee" <jrigsbee[at]rigsbee.net> wrote:

- quote -

A part of money put in to run a corporation must be
capitalized, and part can be loaned. The last time I
checked the IRS didn't have a problem with one third capital
and two thirds debt.

Get to a lawyer right away to set up a contract with the
corporation providing for capital (in exchange for stock)
and loan payments. You could even provide that you will
personally make payments on behalf of the corporation during
its first year, for which the corporation will owe you the
money back. I don't know that the IRS would allow those
deductions, but I think it's legally reasonable to give it a
try.

DO NOT TRY THIS AT HOME.

Stu

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Thank you both very much for your responses. I have filed
for an extension so I have 6 months to deal with the corp
return. But need to get my personal done immediately.
As you know this is a new company and it had no income in
2005, but several expenses which I paid myself. I now
understand how critical it is to keep the expenses seperate
and make company pay for them via checking account or
establish a corp amex account.

I also understand from your posts that I should treat
expenses as capital contribution which can then be deducted
on 1120s. But since corp has no income will this help me
any personally? Also, what form(s) and records must I
complete and record to treat as capital contribution? Will
I be able to report something on the k1 that can then be
used to deduct on my personal return?

Thanks again.

jlr

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"rigsbee" <jrigsbee[at]rigsbee.net> wrote:

- quote -

I would most likely treat the costs as a contribution of
capital to the corporation (additional paid in capital).
The costs would then be deducted on the corporate return.
Now, your costs incurred prior to the start of business
(i.e. start-up costs) need to be capitalized. However, you
can elect to expense up to $5,000 of those start-up costs.
The remaining balance would be amortized over 15 years.

I believe you might be able to deduct your costs at the
individual level using the SBE.

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rigsbee wrote:

- quote -

I know you don't want to hear this, but as a new S Corp
operator you really should get some professional guidance.

Sadly, you don't have many options:

1 - these are business expenses and not unreimbursed
employee expenses. As such they are NOT deductible on your
personal return. See Kleithermes v. Comm for details.

2 - if the company did not have sufficient funds to pay for
them, then you may have a "thinly capitalized corporation"
problem. Way too long to explain here and now.

3 - your only real option is to treat them as contributed
capital to the corporation. Again, this is a bit
convoluted, but not too difficult if you know what you're
doing.

What you didn't ask about, but which I think you should be
aware:

4 - as an S corporation you need to understand the concept
of basis. Basis is what allows you to deduct losses on your
personal return. If the company doesn't have sufficient
funds to pay expenses you MAY NOT have sufficient basis to
deduct losses.

5 - There are sequencing rules for how you account for your
basis, for money you take out and for other items that pass
through to you. You need to understand these to do both the
1120S and 1040 correctly.

6 - you also need to understand the At-Risk rules. This
will also limit what you can claim as losses on your
personal return.

I would suggest you seek out a competant tax pro in your
area for some help. But keep in mind that the corporate
return WAS DUE 03/15/06. If it wasn't extended it is now
late. Good luck finding a pro that understands S Corp
taxation that can work with you this close to 04/18 when
your business return is already late.

Good luck,
Gene E. Utterback, EA, RFC

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Hello,

I formed an S Corp in 2005 and have many unreimbursed expenses
ranging for PO Box fees, 800 numbers, pay per click services,
hosting fees, to education and coaching services. All expenses
were paid with my personal AMEX card since company doesn't have
funds to pay for expenses itself.

I own 100% of the stock. I am preparing my personal taxes and
need to find out how to report the unreimbursed expenses.

Would someone please offer some guidance on what I am to do?

Thanks in advance.

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