S corp shareholder loans

Technical topics regarding tax preparation.
#1
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19-Aug-2019 11:11am
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phoenix
S corp Client loaned business substantial amount of money to keep the company going over covid

We are recording it as shareholder demand loans.

does this mean we have to pay interest using the short term APR rate which is currently .12%?

Seems client is better keeping it as a demand loan so he can use the lower short term rate.

It may take years to pay back the loan

Am I reading the imputed interest rules correctly?

Thanks
 

#2
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22-Apr-2014 3:06pm
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WA State
Is he the only shareholder?
If so, just show it as contributed capital and sidestep all the loan requirements.

mike704395 wrote:It may take years to pay back the loan


Assuming he's not the only shareholder, then use the rate that corresponds to the expected payback period. Don't set up the client for failure in this respect.
~Captcook
 

#3
Nilodop  
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Pennsylvania
CaptCook implies an interesting issue, namely that a demand loan where he is the only shareholder doesn't have much substance given the reality that payment can only be "demanded" if, as, and when he decides to do so. Form v substance, loan v equity.
 


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