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Discussion Forum Index --> Basic Tax Questions --> Unpaid loans from shareholder
Discussion Forum Index --> Tax Questions --> Unpaid loans from shareholder
Tskap (talk|edits) said:
| 19 February 2008
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| I have a client who has made $100,000 in loans to his s-corporation since inception. The s-corp was closed at the end of 2007 and he wants to know what portion, if any of his unpaid loans can be taken as a loss on his 1040? This is the first year we are preparing his s-corp and personal return - don't have much history right now. Any info woud be appreciated.
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JR1 (talk|edits) said:
| February 19, 2008
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| What's his basis in the loan? If had a hundred thou' loss, and capital stock of $1000, then his basis remaining is $1000 since the loss went against that basis. Figure that out.
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LJACPA (talk|edits) said:
| 19 February 2008
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| JR, I think you're being too concise with your response. I say this, because I'm working through the same situation as Tskap. I posted another discussion yesterday to try to get some cites to look at (probably Sec 1367, maybe 1244) and had to put it aside. My situation is that I know the stock basis has been reduced to -0- and the loan balance though $136,000 only has a basis of $67,000. I hate reading code and still researching what to do with this.
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JR1 (talk|edits) said:
| February 19, 2008
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| Less time, less words! Well, Lynne, not sure of your question. If the entire 136k is repaid, with basis of 67k, then you've got cap gain for the difference. If the whole thing is written off, then you have a loss for the basis. Right? Or am I missing something.
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LJACPA (talk|edits) said:
| 19 February 2008
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| That's right, but what kind of loss? Is it a loss on disposition of stock and could qualify for 1244 or is it a business bad debt? I really didn't want to ask this, but am intending to go back and research, just couldn't look at it anymore.
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JR1 (talk|edits) said:
| February 20, 2008
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| We know the answer we want...I'd say it's 1244.
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LJACPA (talk|edits) said:
| 31 March 2008
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| I'm still fighting this battle. Since we've used up all stock basis and 1/2 of loan basis in losses throughout the years, we're left with a reduced basis SH loan (probably not documented, but let's forget this part) that will not ever be paid. I don't believe we have a 1244 issue in any way, but after hours and hours of research, I did the unthinkable and contacted someone at the IRS who is local and been a big help previously. I actually got two responses, both of which opined that the reduced basis SH loan would be reported as a NBBD, which I have done. I couldn't find anything to the contrary. Does anyone have any thoughts on this, please?
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