Restructure Debt to Create At-risk Basis

S corporation losses are limited to amounts invested and loaned DIRECTLY by the shareholder(s) to the S corporation. If debts are currently between the S corporation and an unrelated third party, such as a bank, restructuring the debt through the shareholder(s) to the S corporation will increase the shareholder's at-risk basis for loss deduction. However, when the debt is repaid to the shareholder, the shareholder may have to recognize income since the debt's "at-risk basis" is reduced by the S corporation losses used against the debt. Please contact us to discuss this matter further. (Note: Being a COSIGNER or GUARANTEEING a corporate debt will NOT provide you with "at-risk basis" to deduct losses. ONLY direct loans from the shareholder(s) to the corporation will create at-risk basis.)