S Corporation pays 10% owners C Corporation

[Judy rocks]

I have an S Corporation with a 10% owner.
The 10% owner owns the shares as an individual.
In 2015 the S Corporation made payments of 24,000 to the 10% owners C Corporation.
The payments were for services the 10% owner rendered to the S Corporation

Questions:
(1) is the 24,000 deductible for the S Corporation
(2) would the 24,000 be deductible if the 10% owner owned the S Corporation as the C Corporation and not as an individual
(3) can the 24,000 be put on the 10% owners K1 - if so where
(4) what would the debit side of the journal entry be in the S Corporations books for the 24,000 payment if it is not a legitimate expense

[kathyc2]

I have an S Corporation with a 10% owner.
The 10% owner owns the shares as an individual.
In 2015 the S Corporation made payments of 24,000 to the 10% owners C Corporation.
The payments were for services the 10% owner rendered to the S Corporation

Questions:
(1) is the 24,000 deductible for the S Corporation
(2) would the 24,000 be deductible if the 10% owner owned the S Corporation as the C Corporation and not as an individual
(3) can the 24,000 be put on the 10% owners K1 - if so where
(4) what would the debit side of the journal entry be in the S Corporations books for the 24,000 payment if it is not a legitimate expense

I'm not following where your concern is. Is it because the services rendered were not close to being worth 24K, or because the person performed the services and the C receive the payment?

[TaxGuyBill]

The payments were for services the 10% owner rendered to the S Corporation

If the payments were for work as an employee of the S-corporation, the payments need to be on a W-2 to the individual, not payments made to the C-corporation. If the S-corporation hired the C-corporation as an Independent contractor (for services separate from the employee's work), then it is fine.

(2) would the 24,000 be deductible if the 10% owner owned the S Corporation as the C Corporation and not as an individual

A C-corporation can not own stock in an S-corporation.

[Judy rocks]

Services definitely worth 24,000. Are they deductible to the S Corporation?

The services performed were definitely worth 24,000.
My question is whether it's a deductible expense because the owner of the C Corporation is a 10% owner of the S Corporation.
Also the 10% owner of the S Corporation owns the S Corporation as an individual not as a C Corporation.

I'm not following where your concern is. Is it because the services rendered were not close to being worth 24K, or because the person performed the services and the C receive the payment?

[kathyc2]

The services performed were definitely worth 24,000.
My question is whether it's a deductible expense because the owner of the C Corporation is a 10% owner of the S Corporation.
Also the 10% owner of the S Corporation owns the S Corporation as an individual not as a C Corporation.

The fact that 2 companies with some common ownership do business with each other presents no problems with deductibility. There are some restrictions on timing of deductions between related parties, but since you said paid I'm assuming it was not showing as a liability at year end. I'm thinking what you described would not be a related party for this purpose, but if it was a year end accrual, you might want to check for sure.

[Judy rocks]

Yes Bill that was my question

That was my question exactly.

Thank you for restating it.
My question was.
Can an S Corporation hire a C Corporation for work as an independent contractor if the C Corporation is owned solely by an owner of an S Corporation?
And your answer is.
Yes
So I got my answer.

And thank you also for letting me know that a C Corporation can't be an owner in an S Corporation.
( I could have looked this one up )

If the payments were for work as an employee of the S-corporation, the payments need to be on a W-2 to the individual, not payments made to the C-corporation. If the S-corporation hired the C-corporation as an Independent contractor (for services separate from the employee's work), then it is fine.




A C-corporation can not own stock in an S-corporation.

[Judy rocks]

It definitely wasn't a year end accrual.

QUOTE=kathyc2;181234]The fact that 2 companies with some common ownership do business with each other presents no problems with deductibility. There are some restrictions on timing of deductions between related parties, but since you said paid I'm assuming it was not showing as a liability at year end. I'm thinking what you described would not be a related party for this purpose, but if it was a year end accrual, you might want to check for sure.[/QUOTE]