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Two things here:
First, I was just talking today to a colleague about amending returns that were 3 to 7 years old. There is a provision in the Internal Revenue Code that prevents REFUNDS after 3 years, but there is nothing that says you cannot still amend the return to get the correct information on the returns. He was amending old returns to properly report a capital loss that was being carried forward that had been incorrectly calculated in 2005. I am now amending 2006 to present to report RMDs that were not taken, and will result in a small amount of tax each year, but less than the tax that would be assessed if it was all reported in the current year. So, in theory, you COULD amend the old return to correct your basis!
Second, I found this on Loans to Shareholders:
To avoid problems, adopt the "walk-like-a-duck, quack-like-a-duck" strategy: Even though the shareholder may have truly intended the checks to be loans, the best way to convince the IRS of that fact is to follow all of the formalities, just as if the corporation were loaning funds to a stranger. Things like promissory notes, repayment schedules, a reasonable interest rate charge, and a track record of repayments-even if not perfect-can go a long way toward persuading an IRS auditor that the parties intended the payments to be loans.
Also, the tax code provides that a distribution made by a corporation with respect to its stock is a taxable dividend to the extent of a corporation's earnings and profits [IRC Sec. 301, 316]. Whether a shareholder's withdrawals from a corporation are loans or dividend distributions depends on whether, at the time of the withdrawals, the shareholder intended to repay the amounts received and the corporation intended to require repayment [Miele, 56 T.C. 556 (1971)]. On that issue, a shareholder's statement that he or she intended to repay can be considered. But the shareholder's statement won't prove the withdrawals were loans, especially in the case of a closely held corporation, unless it is supported by other facts indicating an arms-length transaction.
The following factors have been used by courts to determine whether a corporate advance is a loan or a dividend:
1. The extent to which the shareholder controls the corporation.
2. The earnings and dividend history of the corporation.
3. The size of the advances.
4. Whether a ceiling existed to limit the amounts advanced.
5. Whether or not security was given for the loan.
6. Whether there was a set maturity date and repayment schedule.
7. Written evidence of a loan, such as an interest-bearing note.
8. Whether the corporation ever took steps to enforce repayment.
9. Whether the shareholder was in a position to repay the loan.
10. Whether there was any indication of attempts to repay by the shareholder (e.g., Nahikian T.C.Memo. 1995-161).
The Epps case (T.C. Memo. 1995-297) is a good example of how these factors are weighed. John Epps and his wife were the sole shareholders of EMSC Inc. From the time of EMSC's incorporation, John routinely withdrew corporate funds from EMSC for his personal use. These withdrawals were recorded on EMSC's books as stockholder advances, and as "'Other Assets'" on the company's financial statements. Epps never executed any promissory notes in favor of EMSC or secured any of the withdrawals with collateral. No specific schedule for repayment was ever established. No interest was charged on the amounts Epps withdrew, and EMSC never placed a limit on the amounts available to him.
However, Epps did make repayments by crediting year-end bonuses awarded by EMSC against his outstanding stockholder advances account. And, after the IRS started an audit of EMSC, Epps transferred title to the condominium in which he lived to EMSC, in return for which $80,000 was credited to the stockholder advances account.
The Tax Court said that the "absence of the standard indicia of indebtedness weighs on the side of a constructive dividend determination." There were no written agreements or notes evidencing the loans. No interest was charged on the amounts withdrawn. There was no ceiling limiting the amount Epps could withdraw. There was no security for the loans, no set maturity date, and no efforts by the EMSC to enforce repayments.
EMSC did not pass a corporate resolution authorizing the advances, and there were no corporate minutes substantiating any formal action taken by the corporation's board of directors. Epps placed a great deal of emphasis upon EMSC's accounting for the withdrawals as loans on its books as evidence of intent to repay the advances. The court responded that while this factor did work in Epps' favor, by itself it was no enough to prove the existence of bona fide loans.
The Tax Court also did not give much weight to Epps' "repayments." The court determined that EMSC's declaration of year-end bonuses and Epps' use of those bonuses to credit his loan account were simply bookkeeping entries designed to give his withdrawals "the color of loans." The court was also dismissive of the condo transfer to EMSC. Since the transfer occurred after the IRS began its audit of MSC, the court did not find it to be "persuasive evidence of an intention to create a real debt."
If the loan is payable on demand, the deemed payment to the shareholder and the deemed repayment to the corporation are treated as if they occur annually [IRC Sec. 7872(a)(2)].
So, as long as you make sure all your "I's" are dotted and all your "t's" crossed, you should be fine with a loan to shareholder.
I hope this answers your questions! Let me know if you have any more.