then ive been doing it wrong for years, as i've always taken the interest as a deduction on the corp return, but have always issued a 1099-INT to the shareholder, so they pick it up as income. each year the note is renewed for 1 year & recorded in the corp minute book. i dont see where IRS would rule against this.
lynne
Cris Kelly wrote:
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
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