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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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Taxpayer is a 100% shareholder in an S Corp. He also was a

Customer Question

Taxpayer is a 100% shareholder in an S Corp. He also was a 100% owner of a rental property LLC.
In 2012, the taxpayer walked away from the rental property, reported debt forgiveness and a resulting gain on his 2012 Form 1040.
Taxpayer had pledged assets of his S Corp as guarantee for the loan.
Subsequently, the bank filed suit and just recently won a judgment against the S Corp for the debt and related legal fees, which will be paid in 2016.
The questions - if the taxpayer filed his 2012 1040 near the 10/15 deadline, do we still have time under the statute to file an amended retun for 2012 and claim a refund?
Or, does the S Corp paying the debt guarantee in 2016 get a tax deduction? Or is the debt payment considered as an S Corp distribution and therefore the shareholder deals with the effect on the 1040 of the repayment?
Submitted: 3 months ago.
Category: Tax
Customer: replied 3 months ago.
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Customer: replied 3 months ago.
I just discovered that the 2012 1040 was filed in May 2013, so that seems to disallow the ability to amend 2012.Can the payment in 2016 be treated as a non business bad debt by the shareholder. In other words treat the payment of the guarantee by the s corp as a shareholder distribution and then pick up that amount on 2016 1040 as a bad debt loss?Or can the s corp deduct the payment as guarantor in 2016?
Customer: replied 3 months ago.
If shareholder can report in 2016 as a bad debt loss, where is it reported?
Expert:  PDtax replied 3 months ago.

Addressed via phone call.