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Your situation sounds fishy to me. How do you pay yourself? I have a C-Corp, not an S-Corp, but I can't just "draw living expenses" out of your corp. I have to pay myself on a W2 basis and pay SS, tax witholding, etc. just like everyone else.

Maybe there's some S Corp tax loophole I'm not familiar with, but I don't think you can earn a living this way w/o earned income.

There is nothing fishy about withdrawing capital from an S corp. It is similar to a dividend, except that the withdrawal is not taxable (there are exceptions when the basis in the business is less than the withdrawal).

It *would* be fishy if he said that he treated the living expenses as deductible business expenses.
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