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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Background: Ive just formed an LLC for a business I am starting

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Background: I've just formed an LLC for a business I am starting (I'm in California). I'm going to be running the business by myself for the first 6-12 months. I'm going to be getting a loan from my parents for $30k-$50k that will help me stay afloat during
this time period. What I’ll Use Money For: I’ll basically use this money for living expenses, etc. and some of it in the business. But basically it will keep me personally afloat so that I can work on the business. Tax Question: Should I have my parent loan
this money to me directly (me, the person) or should I have them loan it to my business, the LLC? In both those scenarios would I need to pay taxes on the dollar amount they loan me? Is there any scenario in which I wouldn’t have to pay taxes on that loan
amount? Or do I pay taxes no matter what? If it’s a ‘gift’ and not a loan is it still taxed? How would I pay the least amount of taxes possible? ☺
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
Tax Question: Should I have my parent loan
this money to me directly (me, the person) or should I have them loan it to my business, the LLC?
Generally - that would not matter if the money are loaned directly to the business or you p[er4sonally take a loan and use funds for business. Because part of the loan will be used for personal expenses - you might want to divide the loan into two loans - personal and business. You will not be able to deduct any of your personal expenses. However business expenses (including any interest you will pay on the business loan will be deductible.
In both those scenarios would I need to pay taxes on the dollar amount they loan me?
The loan is not your taxable income and will not be reported on your tax return - regardless if that is a loan to the LLC or the loan to you personally. The money will be considered as a loan as long as they are expected to be paid back.
If it’s a ‘gift’ and not a loan is it still taxed?
As a recipient of the gift - the person does not need to claim it as income in the US. Regardless of the value. Please see for reference IRS publication 525 page 34 (left column)- http://www.irs.gov/pub/irs-pdf/p525.pdf
Gifts and inheritances. Generally, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you. If property is given to a trust and the income from it is paid, credited, or distributed to you, that income is also taxable to you. If the gift, bequest, or inheritance is the income from the property, that income is taxable to you.
However the donor might need to file a gift tax return when the total gift value is above $14,000 (for 2013). There will not be any gift taxes unless the lifetime limit (which is currently $5,250,000) is reached.
Let me know if you need any help with tax related issues.
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22741
Experience: Taxes, Immigration, Labor Relations
Lev and 7 other Tax Specialists are ready to help you
Customer: replied 1 year ago.

Thanks LEV! I appreciate the response and good answer. Cheers, ***** *****

Expert:  Lev replied 1 year ago.
Thank you for warm words!
I am here to help you better understand tax related issues.
Be sure to ask for clarification as needed.

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