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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
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Experience:  10 years experience
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I took out a Home Equity Loan, line of credit ,000 which I

Customer Question

I took out a Home Equity Loan, line of credit for 100,000 which I contributed to my business (Corp 1120). I have since made an election to treat the 1120 as an 1120-S. If the company can no longer pay the remaining balance on the loan can I take a business deduction as a bad debt for the remaining balance due on the loan that I as an individual will have to pay off.
Submitted: 10 months ago.
Category: Tax
Expert:  Jonathan Tierney replied 10 months ago.

Hi, my name is ***** ***** I can help. Loans from you personally to a S corporation increase your basis in your S corporation which may have allowed to you deduct S corp losses which would otherwise be nondeductible if you had insufficient basis in the S corp stock. If you have deducted S corp losses you may not have any basis in the loans to deduct.

Do you know your basis in the S corporation?

However, if you have not used the additional basis to deduct S corp losses, then you may deduct the loss on the loan as a capital loss on Form 8949 and Schedule D, which will be used to offset your other capital gain income to the extent there is no other capital gain to be offset, up to $3,000 per year may be deducted to offset ordinary income.

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