I have loans from shareholders on my corporate books.

If the loans are properly documented and the corporation is paying a reasonable interest on the loans than there should not be a problem from IRS view point.

You may even want to consider if this is a capital contribution and may include it in capital basis if that is the case.

Let me know if you have any question.

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

Ok...so the loan is not an equal amount from all the stockholders. Yes, in that case you will not consider this as capital.

If the interest rate is comparable to the current market rates for such loans than it is reasonable and there will not be any issues related to the transaction.

Let me know if you have any question.

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

Thin capitalization is an objective determination made upon the evaluation of a corporation's debt-to-equity ratio. An excessive ratio is one in which debt far exceeds equity and typically indicates thin capitalization. Because the nature and requirements of different businesses impose different standards of determining an acceptable debt-to-equity ratio, there are no "hard and fast rules" for what constitutes an excessive debt-to-equity ratio. You may want to compare your ratios with the industry (that you are operating in) standards/norm. This may help you in making such a determination.

Let me know if you have any question.

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.