LLC and C Corp

[Bart]

I have a taxpayer who has two entities - an LLC taxed as a partnership and a C corp. The LLC owns a building that the C corp pays rent to use. The LLC has a mortgage loan for 450,000. The C corp has a line of credit for 250,000. Taxpayer consolidates both loans into one loan for 750,000 and the C corp is making the payments. How do you characterize this transaction? What are the tax consequences to both entities?

[OldJack]

>> How do you characterize this transaction?<<

Stupid! Only a client that is a fool and an ignorant banker would do such.

>>What are the tax consequences to both entities?<<

It could be considered that the C-corp made a $500,000 taxable dividend to its shareholder.

It could be considered that the LLC-Partnership has forgiveness of debt income of $450,000.

>>the C corp is making the payments.<<

Again payments could be considered as taxable dividends to shareholders if the debt was not as stated above or if the C-corp has a receivable loan from the LLC to cover the $450,000.

Who got the extra $50,000?

You need to review all the paperwork to see how the C-corp and LLC have booked this transaction.