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peck916
New Member

A c-corp I own has repaid me a loan I made to it five years ago. There is no interest paid on the loan repayment, just the principal. I assume the c-corp will send 1099?

Where do I report the repayment on my 1040?
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Opus 17
Level 15

A c-corp I own has repaid me a loan I made to it five years ago. There is no interest paid on the loan repayment, just the principal. I assume the c-corp will send 1099?

You probably need to talk with an accountant about imputed interest.

https://turbotax.intuit.com/tax-tips/tax-payments/irs-tax-rules-for-imputed-interest/L7UbulHpC

Businesses are supposed to act in a businesslike manner, which includes charging or paying interest on loans.  Although you loaned money to your own business at no interest rate, you are probably required to report imputed income as if the business paid you at least the IRS minimum interest rate.

If the business repaid you the principle with no interest, the c-corp will not issue a 1099 of any type, but you may be required to pay tax on the imputed interest on your personal tax return anyway.  The loan principle repayment is also not a deductible business expense because the loan proceeds were never reported as taxable income.

If the business pays you a nominal interest amount so you can avoid the issue of imputed interest, the business can deduct the interest as a business expenses (not the principle) and you report the interest (not the principle) as income.  The business would report the interest payment on a 1099-INT.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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3 Replies
Critter
Level 15

A c-corp I own has repaid me a loan I made to it five years ago. There is no interest paid on the loan repayment, just the principal. I assume the c-corp will send 1099?

Why would they send you a 1099?  It was a loan repayment not income and is not reported on an income tax return. Talk to the business and get educated.
SweetieJean
Level 15

A c-corp I own has repaid me a loan I made to it five years ago. There is no interest paid on the loan repayment, just the principal. I assume the c-corp will send 1099?

You own the C Corp? Any other owners?
Opus 17
Level 15

A c-corp I own has repaid me a loan I made to it five years ago. There is no interest paid on the loan repayment, just the principal. I assume the c-corp will send 1099?

You probably need to talk with an accountant about imputed interest.

https://turbotax.intuit.com/tax-tips/tax-payments/irs-tax-rules-for-imputed-interest/L7UbulHpC

Businesses are supposed to act in a businesslike manner, which includes charging or paying interest on loans.  Although you loaned money to your own business at no interest rate, you are probably required to report imputed income as if the business paid you at least the IRS minimum interest rate.

If the business repaid you the principle with no interest, the c-corp will not issue a 1099 of any type, but you may be required to pay tax on the imputed interest on your personal tax return anyway.  The loan principle repayment is also not a deductible business expense because the loan proceeds were never reported as taxable income.

If the business pays you a nominal interest amount so you can avoid the issue of imputed interest, the business can deduct the interest as a business expenses (not the principle) and you report the interest (not the principle) as income.  The business would report the interest payment on a 1099-INT.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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