Discussion:Below market loans
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Discussion Forum Index --> Basic Tax Questions --> Below market loans
Discussion Forum Index --> Tax Questions --> Below market loans
| 22 February 2008 | |
| My client has three companies, a s-corp and two partnerships all owned 90% my husband and wife and 10% by 3rd party. The entities are constantly borrowing and lending each other money to pay bills when needed. They never write up any notes when the loans are transacted.
I think the transactions are subject to code 7872 and that I should apply the blended annual rate for 2007 (rev rul 2007-44 table 6) and that I should apply the rate to the outstanding balance each day to come up with the total interest. Then I will see if this has a significant impact on the tax liabilities of any of the companies to see if section 7872 is still applicable. Just want to confirm that this is how it should be handled. If anyone can confirm that I am on the right track, I would appreciate it! | |
RoyDaleOne (talk|edits) said: | 22 February 2008 |
| If the loans or advances exceed 10,000 I would agree. | |
RoyDaleOne (talk|edits) said: | 22 February 2008 |
| You can offset due to and due from from the same entity. or reclassify all loans as loans to/from shareholders. | |
| 22 February 2008 | |
| Yes, in total they by far exceed $10,000 (which I think is what I have to go by). Individual loans can be very small, for example Co. A will pay Co. B's phone bill for $200. It is a real mess. I did plan to offset the due to and due from on a daily basis to come up with a net liability or receivable on each companies books. I am not sure how it would work classifying them all to loans to/from shareholders - but I'll keep that in mind.
Thanks for your confirmation! | |
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