USA Stockholder loans

[EAinHawaii]

My client is a general building contracting company, a C Corporation, with 3 million gross annual receipts. The sole owner has borrowed $700k from his company gradually over 12 years, does not pay himself payroll, and seldom makes any repayments on his loan. He is a good client otherwise, but will not listen to me on this issue. Please, any suggestions?

 

[kirby]

No payroll could be seen as evading payroll tax. No payments on loan could be seen as loan is a fiction and loan proceeds were a taxable draw. Question for you is how do you stand with respect to 26 USC 7206(2).
Other than a few issues Enron was a great client for Arthur Andersen.