https://ttlc.intuit.com/community/business-taxes/discussion/i-have-a-c-corporation-and-i-loaned-it-7-000-in-2017-and-the-corporation-had-a-loss-in-2017-and-m/01/723793#M29094 Thu, 06 Jun 2019 15:22:27 GMT bharris8358 2019-06-06T15:22:27Z https://ttlc.intuit.com/community/business-taxes/discussion/i-have-a-c-corporation-and-i-loaned-it-7-000-in-2017-and-the-corporation-had-a-loss-in-2017-and-m/01/723793#M29094 Thu, 06 Jun 2019 15:22:27 GMT https://ttlc.intuit.com/community/business-taxes/discussion/i-have-a-c-corporation-and-i-loaned-it-7-000-in-2017-and-the-corporation-had-a-loss-in-2017-and-m/01/723793#M29094 bharris8358 2019-06-06T15:22:27Z https://ttlc.intuit.com/community/business-taxes/discussion/it-depends-if-a-shareholder-s-loan-to-a-corporation-be/01/723794#M29095 <P>It depends.&nbsp;&nbsp;</P><P>If a shareholder's loan to a corporation becomes worthless, the debt must be considered bona fide to qualify for a bad-debt deduction [Reg. 1.166-1(c)]. To be considered a bona fide debt, the loan must meet demanding standards, especially when the shareholder is considered a related party.&nbsp;<BR /><BR />Factors that the courts consider in determining whether a bona fide debt exists as a result of a transfer between related parties include:&nbsp;<BR /><BR />1. The presence or absence of documentary evidence of the transaction (such as an executed note);&nbsp;<BR />2. Whether there is a fixed schedule for repayment (including a maturity date);&nbsp;<BR />3. Whether interest is being charged on the outstanding debt;&nbsp;<BR />4. Whether collateral is obtained or requested;&nbsp;<BR />5. Whether demand for repayment is made;&nbsp;<BR />6. Whether any repayments have been made;&nbsp;<BR />7. Whether the transaction is reflected as debt in the records of the parties; and&nbsp;<BR />8. The financial condition of the debtor at the time of the loan (so that the lender can show the expectation of repayment and intent to create a valid debtor-creditor relationship).&nbsp;<BR /></P><P>To preserve a bad-debt deduction, and support the fact that a true debt exists, shareholder loans to a corporation should always be represented by a formal note. The note should bear a fair rate of interest and should be authorized in the corporate minutes.&nbsp;</P><P>If the corporation&nbsp;had no ability to borrow from a bank, the IRS may consider the "loan" to the corporation an investment or equity interest if the above 8 steps&nbsp;cannot be met.</P> Thu, 06 Jun 2019 15:22:29 GMT https://ttlc.intuit.com/community/business-taxes/discussion/it-depends-if-a-shareholder-s-loan-to-a-corporation-be/01/723794#M29095 JulieH1 2019-06-06T15:22:29Z