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A single member S-corp has consulting business and also a Registered investment advisor (RIA) firm (owner has series-65 & series-7 license and got the firm registered using CA/SEC to be a investment advisor).

Consulting business generates revenue that exceeds expenses (business expenses including payroll). Can the revenue be used to buy investment assets for RIA business (with out subject to taxes. i.e deduct as expense, intra-company loan, provisioning for future) for the reasons, the business has financial arm and the investment vehicle is income producing?

What other ways to do this on a pre-tax basis (taxed to the owner of S-corp) as loan from revenue (or income) etc ?

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S-Corp is a disregarded entity, so there's no "pre-tax" basis or "intra company" anything, for tax purposes.

In any case, investment cannot be used as a business expense or deduction from income, since you're purchasing an asset. If the asset is used as part of the business, you can deduct the depreciation. If it's just held as an investment asset then there's no expense incurred, just conversion of one type of asset (cash) into another (whatever else you bought), which is a tax event with the notable exception of 1031 exchanges (for real estate only).

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  • Thanks @littleadv. the investment is used to actively trade and set benchmark for the fund/portfolio to gain accreditation to acquire other investors/customers. so this more like using revenue for expansion of the business. (just like expensing a depreciable asset)
    – cyborgt8
    Commented Jul 2 at 17:43
  • @cyborgt8 I suggest you talk to a qualified tax adviser (CPA, ideally, since there may be accounting questions as well) to discuss this. This is well beyond the scope of personal finance. As a general rule investment is not a deductible expense since you're not losing any value. Similarly, in the situation you're describing I don't see how you can depreciate anything, for the same reason. There may be an issue of active participation vs. passive trading which change tax from capital gains to ordinary income, etc. Fund managers have special rules when it comes to taxes.
    – littleadv
    Commented Jul 2 at 17:45
  • thank you @littleadv.
    – cyborgt8
    Commented Jul 2 at 18:14

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