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Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 54014
Experience:  29 years of experience as a tax, real estate, and business attorney.
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11.30.2010 My wife and I are in our senior years and have

Customer Question

11.30.2010

My wife and I are in our senior years and have owned a small private S corporation for many years. Our firm has been running losses since last few years; and our CPA has filed our 1020 Tax Returns showing losses. Our daughter used to work for the company and has been one of the company's directors since many years. During the earlier years she worked with us, she was gifted 10% of the company’s shares. She got another unrelated job in a large company several years ago but still maintained her directorship of the company and helped on needed basis. This year, at our request, our daughter has contributed money out of her own pocket and assisted the company payoff part of the company’s bank loan interests expenses. She agrees to continue contributing a portion of her earnings to help the company’s cash flow. The question is: Is she allowed tax credit from her annual incomes on the fund she contributed to the company since she holds 10% shares of the company? The company accountant entred her fund injection in the books and we also under board minutes.

Please advise. Thank you.
M.L.K.
Burlingame, CA
Submitted: 6 years ago.
Category: Tax
Expert:  Richard replied 6 years ago.

Good morning. Because your company is an S Corporation, the income, loss and credit items flow through to the owners based on each owner's ownership interest in the company. With her additional investment, perhaps she is entitled to a larger ownership interest which would allow her a larger percentage of the allocated items. But, other than an allocation based on her ownership interest, she is not allowed a preferential allocation of any tax items.

 

 

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The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

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