S Corp K-1 ?

[Kram BergGold]

My client is the sole owner of an S Corp. She has plenty of basis. Her 2006 K-1 shows a line 1 loss of 4k and a section 179 deduction of 6k. She has 55k of wages from the S Corp. So she gets the 4k line 1 loss. My issue is the 6k section 179. How does the S Corp pass this along to her if it had negative income? I thought the S could not claim 179 in excess of income.

[veritas]

Because the

shareholder compensation is added back to the corporate net loss to free the 179 as a pass through item.

[Jiggers]

See IRS PUB 946, page 23

See the IRS Pub, it explains how to calculate the taxable income for an S-Corporation.

[Kram BergGold]

Thanks Veritas

I thought that was the answer but I wanted to be sure.