How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Megan C Your Own Question

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 15313
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
23669918
Type Your Finance Question Here...
Megan C is online now
A new question is answered every 9 seconds

If I give a personal loan to a corporation, should I have an

Resolved Question:

If I give a personal loan to a corporation, should I have an interest rate on the note so when the corporation pays me back with interest the IRS won't tax my principal as income?
I will only pay tax on the interest received as ordinary income right?

Now if I do the same to an offshore corporation that I control through a wire transfer from my personal brokerage account to the corporate brokerage account, should I do the same as the example above if the principal is wired back to my personal brokerage account with the interest owed?

Thank you
Submitted: 11 months ago.
Category: Finance
Expert:  Megan C replied 11 months ago.

Megan C :

Hello and welcome. Thanks for your question. My name is XXXXX XXXXX I would be happy to help you today

Megan C :

How are you doing today?

Megan C :

You should state the interest and receive interest from the corporations and that will be what you are taxed on.

Megan C :

You will never be taxed on the principal of the loan.

Megan C :

Having a loan agreement is the best way to protect yourself.

Customer:

Does this hold true if I own the offshore corporation and I fund the corporation with a personal loan?

Megan C :

Yes, that's true - you are never taxed on the principal amount of the loan. Loan proceeds and repayments of principal are never taxable. You are only taxed on the interest you receive.

Customer:

What is the minimum interest rate that I should charge to satisfly the IRS or does it even matter as long as there is interest on the note?

Megan C :

let me get you the list of rates. You should charge at least the amount that the IRS publishes.

Megan C :

You can go to THIS SITE each month, and get the list of Applicable Federal Rates.

Customer:

I just checked the tables and if I charge 6 or 8% interest I should be fine. Do you agree?

Megan C :

Yes, I agree. The AFRs are very low right now.

Customer:

When making the note ,I will sign my name as the maker of the note. When I put the name of the corporation, will that suffice or do I need to sign also for the corporation? The reason I ask is because a corporation is in itself a legal person or enity. Right?

Megan C :

Right, you will need to sign as the corporation as well.

Customer:

Meaning I sign twice, once as the note maker and second as the owner of the corporation. Right?

Megan C :

That is correct.

Customer:

Mrgan, if for some reason the loan to the corporation goes bad and cannot be repaid. Would I be able to write the loan note off? plus interest?

Megan C :

You could write the loan off as a capital loss, but you would not write off the interest. You can only write off what you have given the company which has not been repaid.

Customer:

OK. If the note is over a year and I had to write it off, would that be considered a long-term capital loss on my personal taxes?

Megan C :

Yes, that would be considered a long term capital loss

Customer:

Thank you Megan for anering my questions, you have been a big help!

Megan C :

I'm so glad. If you would, please rate positive so that I may receive credit for assisting you today

Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 15313
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and 2 other Finance Specialists are ready to help you
Expert:  Megan C replied 11 months ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Rakhi Vasavada

    Financial and Legal Consultant

    Satisfied Customers:

    2073
    Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
< Last | Next >
  • http://ww2.justanswer.com/uploads/RA/rakhi.v/2012-7-3_14374_RakhiVasavadaL.64x64.jpeg Rakhi Vasavada's Avatar

    Rakhi Vasavada

    Financial and Legal Consultant

    Satisfied Customers:

    2073
    Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
  • http://ww2.justanswer.com/uploads/BU/BusinessTutor/2012-2-2_115741_Kouki2.64x64.jpg Manal Elkhoshkhany's Avatar

    Manal Elkhoshkhany

    Tutor

    Satisfied Customers:

    1890
    More than 5000 online tutoring sessions.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    1755
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JK/jkcpa/2011-1-16_182614_jkcpa.64x64.jpg JKCPA's Avatar

    JKCPA

    CPA

    Satisfied Customers:

    838
    Bachelors degree and CPA with Accounting experience.
  • http://ww2.justanswer.com/uploads/starside8/2010-2-16_55433_DSCN1175.JPG Eric's Avatar

    Eric

    Financial Manager

    Satisfied Customers:

    558
    Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.
  • http://ww2.justanswer.com/uploads/FA/fastfile/2011-12-15_23139_Klein2011small.64x64.jpg R. Klein, EA's Avatar

    R. Klein, EA

    Accountant

    Satisfied Customers:

    397
    Intuit Ask a Tax Expert. QuickBooks Certified Pro Advisor (all editions)
  • http://ww2.justanswer.com/uploads/dkaplun/2009-05-17_173121_headshot_1_2.jpg Dimitry K., Esq.'s Avatar

    Dimitry K., Esq.

    Attorney

    Satisfied Customers:

    324
    NASD Licensed Rep, 1997-2001, Business Attorney