Unreimbursed business expense deduction for C-Corp. co-owner?

[ProPerDoper]

What is the name of your state (only U.S. law)? California

I own 42% shares in a small business C-Corporation, a manufacturer's rep firm.
In 2009 due to the poor economy the 3 co-owners were not able to be reimbursed for their monthly business expenses, which total anywhere from $16k and up for each individual owner for the year.

Can each of us take a deduction on our personal income taxes for these amounts?

How would we treat the repayment on our future taxes if paid back later?

Is this a red flag of any sort for an audit, either personally or corporately?

Anything else we should consider?

Thanks!What is the name of your state (only U.S. law)?

 

[tranquility]

Yes, you can take the unreimbursed business expenses, subject to 2% on schedule A. If reimbursed, it will be income per the Tax Benefits Rule in the year received.

Why would a person doing proper reporting worry about "flags"?

 

[ProPerDoper]

Yes, you can take the unreimbursed business expenses, subject to 2% on schedule A. If reimbursed, it will be income per the Tax Benefits Rule in the year received.

Why would a person doing proper reporting worry about "flags"?

It's not the outcome, but the process during an audit that concerns me. Proper reporting or not, it's still a time drain.

Seems to me that if reimbursement is expected at any time in the future, having the repayment taxed sets you up for less funds in the long run, unless the taxes that would have to be paid would not exceed the tax benefit received from the deduction taken.

Straighten out my thinking process here please....

 

[davew128]

Straighten out my thinking process here please....

Sounds like you already did.

 

[LdiJ]

It's not the outcome, but the process during an audit that concerns me. Proper reporting or not, it's still a time drain.

Its not a time drain at all if the records are precise and accurate

Seems to me that if reimbursement is expected at any time in the future, having the repayment taxed sets you up for less funds in the long run, unless the taxes that would have to be paid would not exceed the tax benefit received from the deduction taken.

Straighten out my thinking process here please....

Can you predict the future?

.