Custom Search

29 September 2008

Re: [taxchat] interest on a loan to S Corp by the shareholders

Awwww, shucks, Cris.  Since you called me a wonderful person, I just had to look this up for you.  I didn't have much time to spend on it because I'm kinda swamped right now, and I didn't have a cite because this was just one of those things I've always known, and I don't remember where I heard it.  I can give you this info that I found in Pub 542 (Corporations).  As you can see, this is a general rule that applies to most entities, not just corporations.  See Pub 542 for more info....
 
I hope this helps.
 

Related Persons

A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income......

Debbie B.

 
 
From: Cris Kelly
Sent: Monday, September 29, 2008 3:27 PM
Subject: [taxchat] interest on a loan to S Corp by the shareholders

I put this question up awhile ago, and Debbie B being the wonderful person that she is responded with the below.

"interest on loan to S Corp

An S-Corp cannot deduct accrued interest owed to a cash basis shareholder.  You can record the interest on the S-Corp books, but make an M-1 adjustment on the S-Corp tax return since it cannot be deducted until paid.

Debbie B"

The preparer doing their individual return wants to know why I am not deducting the amount on their return.  She does not think the ABOVE statement is correct.  I would also like to point out that she is the person that did the corp return the prior year and didn't include any interest calculation!

I am going to start trying to find this written somewhere; however, I thought if anyone knew they could give me some directions to narrow done by research.

Thanks for the help,

Cris

__._,_.___
IRS Circular 230 Disclosure: Unless expressly stated otherwise in this transmission, any tax advice contained herein, forwarded with or attached to this message was not and is not intended to be used, nor may it be relied upon or used, by any taxpayer for the purpose of (1) the avoidance of any tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions, or (2) promoting, marketing or recommending to another party any tax transaction or tax-related matters that may be addressed herein.
Yahoo! Finance

It's Now Personal

Guides, news,

advice & more.

New business?

Get new customers.

List your web site

in Yahoo! Search.

Discover Tips

on healthy living

and healthy eating

on Yahoo! Groups.

.

__,_._,___
Custom Search