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Loaning money to family for business? Need loan for business…

Customer Question
Loaning money to family...

Loaning money to family for business?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Need loan for business expense will pay back @ 3% interest

Accountant's Assistant: Is there anything else the Accountant should be aware of?

The business is strong & we are not worry about the pay back just the IRS issues.

Submitted: 3 months ago.Category: Tax
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3/24/2018
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,637
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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My name is***** will assist you today.

Please give me one moment while I review your question and type my initial response

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

The general concern with loaning money to a family member or family business is that the loan is actually a "bona fide" loan.

The loan agreement should bear a fair rate of interest and 3% is a currently fair interest rate, and should be documented in the companies meeting minutes. Factors that the courts consider in determining whether a bona fide debt exists as the result of a transfer between related parties include:

  1. Documentary evidence of the transaction such as an executed note
  2. Whether there is a fixed schedule for repayment, including a maturity date
  3. Whether interest is being charged on the outstanding debt
  4. Whether collateral is obtained or requested
  5. Whether demand for repayment is made
  6. Whether any repayments have been made, and
  7. Whether the transaction is reflected as a debt in the books and records of the parties
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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

If you perform the steps outlined above, then the IRS would general agree that the loan is a bona fide loan.

Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

When you have no further questions please take a moment to accept the answer by clicking on three stars or more.

Have a great day.
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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

Ask Your Own Tax Question
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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