S-Corp health insurance - spouse

[natiro]

Shareholder in S-Corp has spouse employee (yes, she really does work for him, so this is legitimate.) They have a group policy. Are her health insurance premiums deductible by the corporation without adding to W2? I don't believe they are, due to stock ownership attribution rules (she doesn't actually own any stock but I believe she is deemed to.)

If a Sch C filer has this same situation, the spouse's premiums would be a deduction on Schedule C.

In this case, with the S-Corp, I don't think it will really make any difference in the end, if I deduct at the corporate level or if I deduct on 1040, but I'm just curious if anyone has any thoughts about it.

Thanks.

[Bees Knees]

TTB, page 13-25, "an S corporation is treated as a partnership and a more than 2% shareholder of an S corporation is treated as a partner for purposes of certain fringe benefits. A more than 2% shareholder of an S corporation also includes members of the shareholder's family, including a spouse, children, grandchildren, and parents. (IRC Section 318)"