Deducting Unreimbursed Expenses by Physician S Corp Shareholder

Tax Court Ruling on Deductibility of Unreimbursed Business Expenses for S Corporation Shareholders

Many physician shareholders in S corporations incur expenses out of their own pocket that do not get or have not yet been reimbursed by the corporation. If “ordinary and necessary” to the corporation’s business, the corporation deducts these expenses on its tax return.

A recent tax case addressed this issue:

The Tax Court redetermined deductible amount of S corp. shareholder/vice pres.’s unreimbursed employee business expenses. Pursuant to corp.’s expense assumption/non-reimbursement resolutions, car, truck, supplies, subscription and partial post office box rental expenses were taxpayer’s own, not corp.’s, and were deductible by him to extent ordinarily and necessarily incurred as part of his business of serving as corp. employee and maintaining corp. office; but, Code Sec. 67 ‘s 2 % floor and Code Sec. 68 ‘s limitations applied. Also, depreciation expenses, although relating to covered truck and office equipment expenses, were denied for lack of substantiation. (Ronnie O. Craft, et ux. v. Commissioner, (2005) TC Memo 2005-197 , 2005 RIA TC Memo ¶2005-197 )

About the Author

Reed Tinsley CPA

This article is written by Reed Tinsley, a Houston, TX-based CPA with over 30 years of experience advising physicians and medical practices across Texas and the United States. Reed holds certifications as a Certified Valuation Analyst (CVA), Certified Healthcare Business Consultant (CHBC), and Certified Financial Planner (CFP), specializing exclusively in the healthcare sector. He is a published author, nationally recognized speaker, and trusted advisor to physicians on accounting & tax, practice management, and financial planning. Schedule a Free Consultation.