Discussion:S Corp Loan - Imputed Interest
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| Revision as of 23:43, 23 March 2009 Harry Boscoe (Talk | contribs) (PBR makes it sto) ← Previous diff |
Revision as of 14:03, 24 March 2009 Dnc0716 (Talk | contribs) (I thought a sing) Next diff → |
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| {{ForumReplyPost|UserID=Harry Boscoe|Date=23 March 2009|Text=PBR makes it stop. But then it starts up again...}} | {{ForumReplyPost|UserID=Harry Boscoe|Date=23 March 2009|Text=PBR makes it stop. But then it starts up again...}} | ||
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| + | {{ForumReplyPost|UserID=Dnc0716|Date=24 March 2009|Text=I thought a single-member LLC is a "disregarded entity" and therefore reported on sch C or E, depending on the income type. So why would you impute interest?}} | ||
Revision as of 14:03, 24 March 2009
Discussion Forum Index --> Basic Tax Questions --> S Corp Loan - Imputed Interest
Discussion Forum Index --> Tax Questions --> S Corp Loan - Imputed Interest
| 23 March 2009 | |
| My client has made distributions in excess of basis of his S Corp interest (LLC). So, to avoid capital gain treatment on the distribution, I'm suggesting he reclassify distributions as shareholder loan. Loan is $36,000 at year end.
There was an earlier thread from 2006 that referenced Rev. Ruling 97-57 and concluded that no imputed interest was required on an S Corp shareholder loan because there was no net tax effect to the shareholder (interest income to the shareholder, lower S Corp earnings passed through). I disagree. And I read Rev. Ruling 97-57 and I really disagree. I think shareholder needs to impute interest at AFR. Right? | |
| 23 March 2009 | |
| I've always imputed interest on shareholder loans. It's not always a wash. Say a 1% shareholder loans $1,000,000 to the corp. The deduction for the expense will go to somebody else as a passthrough but I'm pretty sure the IRS is going to want tax from the lender anyway. | |
Harry Boscoe (talk|edits) said: | 23 March 2009 |
| I'm pretty sure that the rules will require that interest be imputed in this situation. Most of all because the shareholder's interest expense will likely be *nondeductible* and that's what the rules seem to be looking for. My cynicism is peeking out... | |
| 23 March 2009 | |
| He's a sole member LLC (S Corp). Could actually be beneficial to the shareholder if he has investment interest so I figured the IRS couldn't possibly have ruled it a wash not worth calculating.
I guess the real question is if he imputes interest, that decreases his S Corp income and so his loan is larger; larger interest calculation means lower S Corp earnings which means .... make it stop, make it stop! | |
Harry Boscoe (talk|edits) said: | 23 March 2009 |
| PBR makes it stop. But then it starts up again... | |
| 24 March 2009 | |
| I thought a single-member LLC is a "disregarded entity" and therefore reported on sch C or E, depending on the income type. So why would you impute interest? | |
