Shareholders Loans

[ILLMAS]

Do your recommend your clients to charge the corporation interest for loans or vise versa (corp. lending money to the shareholder)?

[michaelmars]

you have to otherwise you have imputed interest. i do on any loan thats lasts more than a year.

[ILLMAS]

you have to otherwise you have imputed interest. i do on any loan thats lasts more than a year.

I have a client that doesn't want to charge his corp any interest, but I know the IRS will do it + plus add the interest to his personal return. I should be okay, if it's documented in a memo to the client regarding the interest, is there anything else I need to protect myself as to "you never told me ...."?

[TAXBILLY]

It's probably a good idea to have him sign the memo for your records.

taxbilly

[BulldogTom]

Do your recommend your clients to charge the corporation interest for loans or vise versa (corp. lending money to the shareholder)?

Absolutely. I prepare the schedule every year and book the interest. We use the rate of interest on the Corp's line of credit as the interest rate.

Tom

Lodi, CA

[michaelmars]

if possible i try and have the clients clear the loans on 12/31. they can reloan the money mid january. Of course it depends on cash flow and dollar amounts but if my clients delay paying A/P etc for a few weeks they can usually do it or bring it way down to make the interest an insignificant amount.