Reclassifying Officer Loans


M

Mark Wiley

I was once involved with a small corporation that I was able
to take the Officer Loans in one yeasr and reclassify them
as Wages in another. Has anyone ever heard nof this and do
you know where I can find documentation on the IRS website
for the rules on this?

Thanks in advance
 
Last edited by a moderator:
Ad

Advertisements

B

Benjamin Yazersky CPA

Mark Wiley said:
I was once involved with a small corporation that I was able
to take the Officer Loans in one year and reclassify them
as Wages in another. Has anyone ever heard of this and do
you know where I can find documentation on the IRS website
for the rules on this?
looks a bit questionable to me

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] >>>
-----> real address on hobokeni or hobokenx <-----
 
Last edited by a moderator:
D

Dick Adams

Mark Wiley said:
I was once involved with a small corporation that I was able
to take the Officer Loans in one year and reclassify them
as Wages in another. Has anyone ever heard of this and do
you know where I can find documentation on the IRS website
for the rules on this?
Almost of us have heard of it. It's known under several
names, e.g., "Cooking the Books", "Slush Fund Accounting".
There are no real rules for this. You just have to pray
for the statute of limitations to expire.

Dick
 
Last edited by a moderator:
S

Stuart A. Bronstein

Almost of us have heard of it. It's known under several
names, e.g., "Cooking the Books", "Slush Fund Accounting".
There are no real rules for this. You just have to pray
for the statute of limitations to expire.
Shifting income from one year to the next reminded me of
straddles, except those involve creating a loss in one year
and an offsetting gain in another year.

While the underlying transaction appears to be legal
(assuming it wasn't planned that way in advance) it could
run afoul of the IRS's ability to reallocate income to
reflect economic reality rather than accounting
technicalities.

What's that code section again?

Stu
 
Last edited by a moderator:
Ad

Advertisements

H

Harlan Lunsford

Mark said:
I was once involved with a small corporation that I was able
to take the Officer Loans in one yeasr and reclassify them
as Wages in another. Has anyone ever heard nof this and do
you know where I can find documentation on the IRS website
for the rules on this?
Notwithstanding the first two comments above, I can think
of a case where this scenario would be perfectly acceptable.
And that is maybe in the case of a startup corporation with
no profits even possible first year of operations, in which
case salaries would be kept to an absolute minimum. Then in
year two with profits on the horizon the corporation would
start to pay wages, and periodically deduct the advance
payments characterized as "officer loans."

Although to even avoid the appearance of evil (for lack of
better word) the corporation in year one should have
probably paid a token (minimum) wage to the officers.

ChEAr$,
Harlan Lunsford, EA n LA
 
Last edited by a moderator:

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top