Stcok Loss

[TAX]

I posted earlier but now I have more specifc detail

Client has s corp

Only things he does buy and sell stocks

(1) Finished Sch D - Loss of $28,000

(2) Loss will transfer to K-1 and then to personal and will take $3000 this year

(3) Also has following expenses in scorp
Training Cost
Postage
Franchise Tax

Where do I record these expenses? As a normal expense and deduct loss for these expenses on personal return? or as an investment expense on sch "A"?

(4) No revenue

(5) Has loan from share holder $52,000

(6) 2007 - Business closed and now he does everything through personal account (thank god!).

Thanks!

[TaxCPANY]

It most depends upon shareholder's basis in loan.

(3) is easiest: those amount to "ordinary expenses," to be shown on p.1 of your client's 1120S -- and the Franchise Tax probably is an add-back on the shareholder's personal, state return. Overall, those should flow-through to Schedule E, page 2 -- en masse.
(5) How much *basis* is left in that 52K loan from "share holder" -- that I must assume is the same guy as your client? That will dictate how much of (3)'s amount he's allowed to declare as a non-passive loss on Schedule E.
(6) If your client yet had basis from that loan, that whole amount -- i.e., the 'lost' investment -- should be shown as a capital loss -- in addition to the flow-through from the K-1. But, did your client elect IRC Sec. 1244, earlier -- which now would afford him an *ordinary* instead of a "capital" loss?
Hope this helps, TaxCPANY.