DOUBLE DIPPING

[Just Curious]

I am a Landlord. One of my tenants sued for their total deposit back. They won on technicalities. I had a large amount of legal fees owed to their attorney. My business did not have it so, I loan it to the business. I expenses the legal fee on the business side bit, I want to be paid back. Do I expense the loan payments? Or is that double dipping?

[MaryK4]

You would not be able to expense the loan payments.  On the business return, you can expense the interest paid until you are paid back, but you would have to include the interest as income on your personal return so there is no benefit.

[Rick19744]

To answer your question, "yes" it would be double dipping since you already recorded an expense when you paid the attorney fees.

What should be happening is:

• You record a liability on your books; debit cash and credit loan
• Next you debit legal fees and credit cash
• You should prepare a proper loan document with appropriate interest between yourself and the business
• Any repayment of the loan to yourself will be a combination of principle and interest.  Only the interest will be deductible.
• Depending on the repayment schedule, the IRS could reclassify the "loan" as a capital contribution.  So make sure you have a repayment plan and actually make payments to yourself.