Clients A & B formed S Corp. and purchased assets of an existing business with a loan from A's father, which is shown as a note payable on the corporate books. Clients A, B and A's father formed an LLC and purchased property with a building. S Corp has been renting building from the LLC. Building and land are being sold at a gain. S Corp has not ever been really profitable, just barely breaking even some years and losses in others. Just planning to wind that business down, however, that large note payable is still on the books.
If dad says don't worry about it (not sure at this point), does it become income to the S-Corp at that point? Should A & B take their gain from land, put into the S-Corp, and pay back what they can before dissolution? I'm having problems thinking this through, so any insight would be appreciated!