Thanks for the reply Rip.The context for my question is as follows:A "friend" boasted about how smart he is, being 100% owner of a sub chapter S corp. He bragged about how even his dog food expense (obviously personal) is charged on his corporate American express card. How on paper, he is losing money, but living the high life, driving an expensive company leased automobile for business & personal use, declaring no income. He added that his corporation and he are one in the same.It seems to me that if the business is paying all of his personal expenses, which as you mentioned, are non-deductible to the business, wouldn't it show as something like a loan the sole employee if it was correctly recorded as non-deductible? If it was paid out of the company checking account, and since every dollar must be accounted for, he must have to pay it back (like a loan, I guess). If, however, he is recording obviously non-deductible expenses as deductible, I guess that's a problem too.In any event, based on what you've said, the Federal Government is the big looozer, because he is paying no personal tax on his wages (because he isn't declaring any). Since he is deducting personal expenses, which are clearly not deductible (thus reducing business income incorrectly), the business is not paying tax on the difference between income and expenses.I guess when I used the term "deducted" when I framed my original question, it was misleading. I should have said: "should he pay for his own dam dog food with his wages, and not with his corporate American Express card?"Do I now seem to have an accurate sense of how personal expenses should be paid, in the context of a sub chapter S corp. and federal income tax?A quick note to confirm this would be very much appreciated.Many thanks for helping me a handle on this.-Mike
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