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Ask USTaxAdvising Your Own Question
USTaxAdvising
USTaxAdvising, Accountant
Category: Finance
Satisfied Customers: 1237
Experience:  Professional with finance related questions.
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Can I deduct payback on loans to shareholders from sale of

Customer Question

can I deduct payback on loans to shareholders from sale of equipment proceeds sub chapter s corp
Submitted: 1 year ago.
Category: Finance
Expert:  USTaxAdvising replied 1 year ago.

Hello,

I can help you with your S Corp question. I need to understand what your question is though exactly .

Can you please confirm that your question is: Can my S-corp sell equipment it owns and instead of the S-corp receiving the cash the shareholders receive the cash and reduce their respective loan balances by the amount of cash received?

If you can please confirm that this is your question I will get back to you right away.

Best regards,

Customer: replied 1 year ago.
that is the the basic question i have and how would i show it if it is possible
Expert:  USTaxAdvising replied 1 year ago.

Hello,

Yes you can do this but it would be best to have the cash deposited to the S corp bank account and then make the loan principal payment back to the shareholders.

Basically you would just record the asset disposal as you would regularly but instead if debiting the cash account for the cash proceeds received you would debit the "loan from Shareholder" account.

The entry for the asset sale would be as follows:

Debit Loan from Shareholder $500

Credit equipment $400

Credit Gain on Sale of equipment $100

Best,