Hi All,
I have never seen this before. I just met with a new client that has a california C-Corp with employees. He owns 100% of the C-Corp. while reviewing his balance sheet, I saw $384,000 in accrual interest and a loan to the C-Corp from my client. I asked him what this is about and he said he loan the company $365,000 back in 2006. He has never paid back the loan and just been accruing the interest. He has not been taking any of the interest as a deduction on the tax return.
He tells me that the old tax preparer ( who died) said this was ok.
My quesitons:
Is this ok? Is this just buying more stock in the business and not a loan. Can he keep doing this until he close the business ( he is 72). Also, if he close the business, what happens to the accrual interest and the loan?
Any help would be appreciated