S-Corp loss created by DB Contribution

[Guest elem]

An S-Corp has income of $100,000 and the owner pays himself $90,000 in wages. The required DB contribution for the year is $100,000.

Based on previous posts it appears that a loss created by the DB plan is allowable and that the loss can be carried forward or even possibly backward to offset income from the S-Corp.

Is it possible to use the loss to offset income (not from S-Corp) from the spouse of the owner of the S-Corp?

[mbozek]

Losses from an S corp can only be deducted by the S Corp owner to the extent that they do not exceed his basis in the S corp and any corp indebtedness attributable to him. Disallowed losses may be carried forward indefintiely by the taxpayer. The S Corp owner needs to consult a tax preparer.

[Kirk Maldonado]

I think that people may want to consider the following provisions in determining the proper tax treatment of those contributions.

Internal Revenue Code Section Section 172(d)(4)(D) provides as follows:

(4) Nonbusiness deductions of taxpayers other than corporations.

In the case of a taxpayer other than a corporation, the deductions allowable by this chapter which are not attributable to a taxpayer's trade or business shall be allowed only to the extent of the amount of the gross income not derived from such trade or business. For purposes of the preceding sentence—

* * *

(D) any deduction allowed under section 404 to the extent attributable to contributions which are made on behalf of an individual who is an employee within the meaning of section 401©(1) shall not be treated as attributable to the trade or business of such individual.

Treasury Regulation Section 1.172-3(a)(3)(iv) provides as follows:

(iv) Self-employed retirement plans. Any deduction allowed under section 404, relating to contributions of an employer to an employees' trust or annuity plan, or under section 405©, relating to contributions to a bond purchase plan, to the extent attributable to contributions made on behalf of an individual while he is an employee within the meaning of section 401©(1), shall not be treated, for purposes of section 172(d)(4), as attributable to, or derived from, the taxpayer's trade or business, but shall be treated as a nonbusiness deduction.

[mbozek]

IRC 1366(d) limits losses of the S corp owner to the amount the owner has at risk in the S corp, e.g., amount paid into the corp and amounts borrowed by the corp. Tax ct has prevented S corp from evading 1366(d) by passing plan contributions to owner via 1099 as individual deductible amount .

[Blinky the 3-eyed Fish]

Kirk, I think your reply button is stuck. You keep coming up with the same answer. BTW, I liked the response with the bolding. I was more becoming to my eyes.