LLC-interest expense/income

[mircpa]

Hello everyone

back again with another question, hope somebody helps me

Taxpayer (100% shareholder) took out loan on LLC's name , used those proceeds towards down payment commercial real estate (taxpayer is on title), which in turn renting property to LLC. LLC is paying interest on loan and monthly rent to shareholders, my question, does this interest expense portion becomes interest income on shareholder's schedule B or Schedule E (gross up with rental income and deducted) or form 4952 investment interest expense

thanks

[Gail in Virginia]

I am not sure that I understand your post. Is LLC a corporation? If they are paying rent and interest to shareholder for use of building owned by shareholder, I would think that the entire amount paid by the LLC is rental expense to LLC and rental income to the shareholder. Shareholder would then be using the amount to pay the interest expense, and deducting same on his return. UNLESS the loan is in the name of the LLC even though the money borrowed was not for the benefit of the LLC, in which case I am thinking LLC deducts interest it is legally liable for, and effectively taxpayer has borrowed this same amount from LLC. Taxpayer should be paying interest on his loan to the LLC, and paying back the loan somehow. Is rent enough less than fair market value to be considered repayment by shareholder?