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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 11133
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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If my business has loaned another company money up, but does

Customer Question

If my business has loaned another company money for start up, but does not hold any stock in the company, how do I deduct that. What category would that deduction fall under fall under? Also, I live in Florida, and my CPA did not file a state return last year for Tangible Personal Property, do I need to file anything for FL? Finally, what is the easiest way to depreciate company assets?
Submitted: 1 year ago.
Category: Finance
Expert:  Lane replied 1 year ago.

Hi,

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So sorry, but there wouldn't be any deduction for a loan MADE (and the receiver doesn't report any INCOME either)

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This is because you will be receiving the money back in the form of payments (also NOT income, except for the interest portion, and payments are not a deduction for the borrower)

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ON the depreciation piece, you might want to look at Section 179 for THIS year ... hasn't been renewed for next year so for ... but this lets you depreciate everything (that would normally have to be spread out over the life of the asset) in the first year placed in service.

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2015 Deduction Limit = $25,000
This deduction is good on new and used equipment, as well as off-the-shelf software. This limit is only good for 2015, and the equipment must be financed/purchased and put into service by the end of the day, 12/31/2015.

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Otherwise you go to the IRS tables and depreciate as a depreciation expense each year over the IRS published class life of the asset,

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See this: http://cs.thomsonreuters.com/ua/fixa/cs_us_en/ass_life_tbl/hid_help_asset_lives.htm

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And finally, on the tangible personal property:

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Yes, here's the Florida Tangible Personal Property return: http://dor.myflorida.com/dor/property/forms/current/dr405a.pdf

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And here'e the FAQ from Florida Dept of revenue on this: http://dor.myflorida.com/dor/property/tpp/FAQtpp.html

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Please let me know if you have questions

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Lane

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Customer: replied 1 year ago.
I guess I am not fully understanding. If this is the case, I will get taxed now, and then again when I pull the money out of the company. This would be a short term interest only loan (less than 2 years). Is there a better way to handle this for tax purposes?
Customer: replied 1 year ago.
Simply a little confusing as to how banks would stay in business if they paid a 40% tax rate on a loaned out money on an annual basis. There has to be something I am missing.
Expert:  Lane replied 1 year ago.

Why do you think you'll be taxed now for loaning someone money?

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It's a loan ... You don't deduct it - and they they don't report it as income ... because it's going to be paid back.

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The only taxable event that happens with loans is the interest income that the lender has to report ... and if it's a business loan the borrower can deduct the interest (a mortgage borrower can deduct interest on up to two homes as well)

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Now, if you are loaning your OWN business money that CAN be a part of your tax BASIS (which affects both capital gains upon sale and the ability to tale operating losses)

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And I'm not sure I understand your comment about banks.

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They, just like anyone else, make their money on the interest (the cost of borrowing for the borrower and the income from lending for the lender) but the principal loaned, and repaid, is never taxed

Customer: replied 1 year ago.
ok - will you be able to speak? I'm trying to get a recommendation on how to do this. This is an LLC. I am the sole owner. I want to get another revenue stream and give out an interest only loan to a start up company. I do not want to get double taxed. If my company brings in $400K I am able to deduct $300k and want to loan $50k - what is the best way to accomplish this at the best tax rate?
Expert:  Lane replied 1 year ago.

Good morning

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I'm back in the office now.

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Please accept the offer above and I'll enter my number.

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