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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55595
Experience:  29 years of experience as a tax, real estate, and business attorney.
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we started a small business, we loaned it money and infused

Customer Question

we started a small business, we loaned it money and infused our money to start it. After it went LLC a few years ago we asked if loan repayment to us is considered personal income. No interest was charged.
Submitted: 6 years ago.
Category: Tax
Expert:  Richard replied 6 years ago.

Good afternoon. The repayment of a loan is not considered income. If there was no interest, however, some amount of interest....based on the Applicable Federal Rate.....would be imputed and that amount would constitute interest income.



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The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

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Customer: replied 6 years ago.
Is there tax code i can quote that would substantiate that?
Expert:  Richard replied 6 years ago.

The Internal Revenue Code states that "gross income means all income from whatever source derived." Gross income is not limited to cash received. "It includes income realized in any form, whether money, property, or services." Gross income includes wages and tips, fees for performing services, gain from sale of inventory or other property, interest, dividends, rents, royalties, pensions, alimony, and many other types of income. Items must be included in income when received or accrued. The amount included is the amount the taxpayer is entitled to receive.


Repayment of rent does not fall within these because you have no net gave someone a certain amount of money and you received that same amount back.

Customer: replied 6 years ago.
You indicated RENT. Please clarify as this was not rental again we infused our money and loaned the company monies, it was a loan. The company has been slowly returning this loan to us in small payments over the past few years.
Expert:  Richard replied 6 years ago.
I'm sorry...I was typing too fast and thinking of another question...I meant repayment of money. I apologize!
Customer: replied 6 years ago.
Its ok. so now for a case law as it were or something to validate to our accountant.

Customer: replied 6 years ago.
I was anticipating some formal code as your paragraph indicates we received funds from the company. It came in to us but again was simply we got it back from the company. Just need a code we can show our accountant that would satisfy his needs to be on the same page.
Expert:  Richard replied 6 years ago.

If you have to validate that a loan repayment is not income to your accountant, you need to get yourself another accountant. :)

Expert:  Richard replied 6 years ago.
Specifically....See Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955)(giving the three-prong standard for what is "income" for tax purposes: (1) accession to wealth, (2) clearly realized, (3) over which the taxpayer has complete dominion). Since a loan repayment creates no accession to wealth, but rather simply puts you back where you were, there is no income.
Customer: replied 6 years ago.
Perfect. I will show this and see what we can do.
Expert:  Richard replied 6 years ago.
Glad to help. You take care.
Customer: replied 6 years ago.
We appreciate it. No last word syndrome here but so we have this service for 30 days ?
Expert:  Richard replied 6 years ago.

On this end, I only see your questions..I don't have the information as to what service you have signed up for. I'm sorry. :)