S-Corporation Shareholder-Guaranteed Debt = No Basis to Deduct Losses

Tax court case Russell, TC Memo. 2008-246, reaffirms AGAIN that shareholder cannot deduct losses financed with debt in the name of the corporation. The S-corporation borrowed money from a bank and the shareholder guaranteed the debt. When the S-corporation incurred losses, the shareholder was not allowed to use the debt guarantee as basis to deduct the losses, which were suspended.