Does the wages paid to a 51% owner of and S corporation add to his basis when it comes to
determining if he can claim a loss that results from section 179. (The S corporation lost $80,000 and the shareholder's basis is zero, but he paid himself $250,000 in wages which was part of the loss.)
The W-2 works for determining income for section 179 limits, but if you have no basis you shouldn't be able to deduct the loss coming from section 179.
IRMN is correct. In addition W2 wages do not increase basis in s-corp. Look at it this way, even if W2 wages increased basis, the resulting payment in cash for these wages would reduce basis by same amount. Thus no effect on basis for any W2 wages.
I agree with IRMN and taxiowa the W-2 Wages will not increase the basis
Au contraire, mon ami Sgentry, the salary paid is moving in the opposite step with the basis being already at the lowest level. Since that salary further increases the lost, it would have degraded the basis downhill, lest the IRS other rules that the basis could never go below zero. Indeed it is still and remains at zero.
The §179 deduction is limited to whether the business has t/b income, but any wages taken by that s/h are added back to the loss to determine if the §179 can be claimed. Using your figures, I say you could use the 179, but...
S corp. basis still prevails, so the 179 might be claimable, but without basis there can be no loss.
