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Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I started a single-owner S corporation in 2008, and loaned

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I started a single-owner S corporation in 2008, and loaned the corporation $5,000 in the form of a zero-interest promissory note (I understand that this should be OK since the amount is below $10,000 and due to the exception in Section 7872(c)(3) of the Internal Revenue Code.) Except for initial partner contributions, the corporation received no other income/funding during the tax year, and had no activity other than working on developing a software system. During the tax year, the corporation had expenses (~$10,000) in the form of purchased equipment and a few services (PO Box, etc.)

Since there was no interest on the promissory note, does the receipt of $5,000 by the corporation need to be declared in any way on the 2008 tax return? Is it considered income by the corporation? Also, do I need to (or it is benefitial to) declare the loaning of $5,000 to the corporation on my personal return?

The loan received by the S-corporation is not income and should not be declared on the tax return as taxable income - form 1120S -


However - these money should be reported on the balance sheet - see schedule L on the page 4 line 19.




Customer: replied 7 years ago.
Thank you--that does answer the first part of the question Smile Would you also please clarify if it is possible (if so, how) to deduct the amount I loaned the corporation, on my personal tax return?

The loan you provide to your corporation is assumed to be repaid to you - so that is not your expense - and therefore may not be deducted on your personal tax return.

You do not need to report the loaned amount on your tax return.

So - if you expected a different answer.

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