topic had to loan $7,000.00 to close business. in Business & farm

had to loan $7,000.00 to close business.

Ard0261 — Tue, 02 Mar 2021 02:33:36 GMT

I had to loan my business $7,000.00 to close and pay off the bills. Is this deductible on my personal taxes.

Re: had to loan $7,000.00 to close business.

ErnieS0 — Tue, 02 Mar 2021 02:48:42 GMT

Possibly. Loans are not deductible, but the bills you paid off are deductible expenses for your business. You don’t say what type of business you had, but any business expenses paid off by the loan would reduce the taxable income of the business or possibly place it into a loss. That might be deductible to you.

Re: had to loan $7,000.00 to close business.

Ard0261 — Tue, 02 Mar 2021 03:38:16 GMT

It was acupuncture, medical massage. LLC Corp with 2 partners.

Re: had to loan $7,000.00 to close business.

ToddL99 — Tue, 02 Mar 2021 15:33:14 GMT

Depending on the balance in your capital account, you may be able to write-off the additional investment as a capital loss when you dispose of of (close) the partnership.

As you described the transaction, it would not have been a "loan" since there isn't any expectation of being repaid by a "closed business".

The $7000 would be a capital contribution to the LLC and would raise your cost basis in the investment. Once the business is closed - no assets, no activities - you would receive a Final K-1.

Report the Final K-1 on your tax return, and indicate you "disposed" of your interest for (presumably) "$0". This will generate a loss in the amount of your remaining capital balance. These entries are made in the Schedule K-1 interview of TurboTax, found under Business Investment and Estate/Trust Income

The capital account contains the following transactions:

+ Investments made by the owner or partner
+ Subsequent profits of the business
- Subsequent losses of the business
- Subsequent draws paid to the owner or partner
= Ending balance in the capital account