I have an LLC with an S-election, which has been nominally profitable for over a dozen years. The S-Corp just has myself and my wife as the shareholder-officers. We have a DB plan coupled with a 401k plan. We draw a reasonable salary from the S-Corp, and the S-Corp contributes to the DB plan as well as some 401k profit sharing.
In the year 2020, at around tax return filing time for tax year 2019 (July 2020), the funds in S-Corp were running low due to loss of business, so I made a personal loan to the S-corp to cover the DB plan contributions along with 401k plan deferrals and 401k profit sharing contributions. Let's say this amount was about $100K. Also note that for tax year 2019, the S-corp had a small profit.
Due to continued loss of business in 2020, the S-corp for tax year 2020 had an even bigger loss, but in calendar year 2021, business is looking up a bit and there's some cash in the bank by May 2021.
Question 1. Even though the S-Corp has a loss in tax year 2020, but because there is money in the bank earned in 2021, can the S-corp still contribute to DB plan and/or 401k Profit sharing, even though this will increase the S-Corp's loss? Note that even without the DB plan and profit sharing contributions, the S-Corp had a sizeable loss in 2020.
Question 2: Because of the $100k loan I had made earlier in 2020 to the S-Corp, I think that may have increased my "basis" in the S-corp? If so, can the S-corp's loss of tax year 2020 flow to my personal tax return for 2020, and could I deduct this loss against my personal income (from a second W2 job that I had to start in 2020 due to poor business) because I have "basis" in the S-Corp?
Thanks
John Bliss
