USA Shareholder Loans

[Jason Taylor]

Should a loan to a shareholder from an S Corporation have interest attached to it? What are the IRS Regulations on this?

Thanks!!

 

[Drmdcpa]

Yes computing interest is required if no interest is stated. The IRS and attorneys often insist that an actual not exists, but that is not reality for small businesses. When the average annual balance exceeds $10k I impute interest if the bookkeeper did not.

If the corp owes the taxpayer this is a good way to get money out of the corp tax free. If the shareholder owes the corp, this can be painful if the interest is not deductible to the shareholder.

 

[Jason Taylor]

Yes computing interest is required if no interest is stated. The IRS and attorneys often insist that an actual not exists, but that is not reality for small businesses. When the average annual balance exceeds $10k I impute interest if the bookkeeper did not.

If the corp owes the taxpayer this is a good way to get money out of the corp tax free. If the shareholder owes the corp, this can be painful if the interest is not deductible to the shareholder.

If the loan to shareholder is less than $10K, no interest needs to be applied?

 

[Drmdcpa]

That is the gauge I used. I believe the law does not actually have a limit.