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Posted by tax_qa@yahoo.com on November 15, 2006, 10:06 pm
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If my corporation has $20,000 net income, can I borrrow
$10,000 for two years? Should I pay tax on $10,000?
Any guideline for the personal loan from corporation?
Thank you.
TAXQA
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Posted by ed on November 17, 2006, 1:19 am
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tax_qa@yahoo.com wrote:
> If my corporation has $20,000 net income, can I borrrow
> $10,000 for two years? Should I pay tax on $10,000?
>
> Any guideline for the personal loan from corporation?
If it's an S-corp you'll have to declare the $20,00 profit
on a K-1 to yourself to pay taxes on it, so bottowing the
$10,000 is not a tax issue. Why not just pay it to
yourself because it's your profit and you paid taxes on it
already.
If it's a C-corp, the corporation will pay taxes on the
$20,000 and Yes, you can loan it to yourself. You should
pay interest, but no taxes unless it could be considered a
dividend--ask your CPA.. If it's a dividend you'll notice
you paid taxes on it twice, which is one of the drawbacks of
a C-corp and probably why you actually have a S-corp.
ed
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
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Posted by Paul Thomas, CPA on November 17, 2006, 1:20 am
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> If my corporation has $20,000 net income, can I borrrow
> $10,000 for two years? Should I pay tax on $10,000?
The corporation (or you, if it's an "S" corp) will pay tax
on the $20,000 income.
The "loan" amount isn't income to you, nor is it a deduction
to the company.
> Any guideline for the personal loan from corporation?
The company may have to charge you interest on the loan
amount, at market rates. The company would have interest
income if they did.
You would have interest expense that, more than likely,
would be personal in nature (no deduction).
If not documented properly, your "loan" might get classified
as payroll (subject to payroll taxes and income taxes) or
dividends (subject to tax) if the IRS were to audit you.
What type of company do you have, and why aren't you taking
this as salary?
--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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