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I want to make sure we're on the same page ... With an S-corp, you're taxed on the profits whether you take them out or not ... it's only the C-Corp that you can decide NOT to distribute dividends and not pay tax
An S-corp is a pass-through (like a sole proprietorship, an LLC and a partnership) Only C-Corps and IRRevocable trusts pay their own taxes ... (at corporate and trust tax rates, respectively)
Now, as the owner, you WILL have a capital account that establishes your basis in the company and that over time is essentially accounted for like this:
Original Cost+ Improvements+ Purchase costs+ Selling costs- Depreciation= Adjusted Basis
Typically the S-corp is the best of both worlds in may ways,... the rental expenses, etc reduce your taxable income,,, AND the capital improvements you make increase your basis (BUT because it'
s still a corporation... there's that liability protection a LEGAL (state law issue, not really related to taxes) separation of your personal and business assets
I still don't see you coming into the chat, SO I'll move us to the "Q&A" mode ... Maybe that will help ... In the men time, you might want to take a look at this: http://www.mondaq.com/unitedstates/x/190688/Income+Tax/IRS+Rules+S+Corporations+Rental+Income+Is+Not+Passive
Let me know of you have further questions
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