Legal Question in Tax Law in California

It does not work that way... Loans to Shareholders do not reduce net income.

Expenses within the corporation do reduce net income. Compensation to you, as an employee, would be an expense... but, then you would have to pay all the payroll taxes on that compensation and make sure you do all the withholding of taxes properly.

You, as a shareholder in an S corporation, pay the taxes on the net income of the corporation. The accumulated net income, if you do not withdraw it, accumulates. You can take that accumulated amount as a dividend without taxation on the distribution... it has been taxed already.

Once you have the K-1 and the tax year is over, you are not left with any tax planning opportunities.. you have to do tax planning before the fiscal year end.