I have been contracting out my pharmacist services to a local hospital and have been paid via 1099. My financial advisor had me set up a C-corp. I am trying to find the best ways to deduct all of my earnings (about $18,000-$20,000 per year) from the corporation as to avoid paying any taxes on those earnings. My financial advisor sent me brief description of IRC sec 117. As owner/sole employee of C-corp can I use IRC sec 117 to set up a schloraship for my dependent children to pay for private primary school tuition and fees? I am not sure my advisors recommendations have been accurate/helpful.

I don't think that sounds plausible! Actually, your dependent children must be employees of your corporation, and perform some meaningful functions. I am not convinced by the arguments presented by your financial advisor. If true, everyone would do that!

Clearly, this is appears to be a personal expense and not related to business, or in IRS lingo, it is an expense that is not effectively connected to the production of income. The IRS would definitely disallow you this expense and impose penalties upon an audit.

Hence, I would recommend that you do not take this deduction!

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