Yes, that is intended to disallow officers from avoiding taxes by being compensated via ‘loans’ and other means. I can’t find any case where dividends or buybacks were found to be violations of that rule. https://cpataxteam.com/blog/s-corp-owners-are-you-paying-you...
replyDo the math for yourself. Paying corporate taxes on profits, then dividend taxes on what gets paid out is not a savings versus paying income+payroll tax (which comes from money that is treated as an expense at the corporate level).
There are more taxes than federal income and corporate taxes. State taxes and especially the ~15% of wages that go to FICA also matter (the topic was small businesses, so presumably the owner's not making so much more than the FICA limit that this becomes negligible).
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