Loan to shareholder payoff

[Tom in Dunwoody]

I have a small C corp business purchased years ago and I am the sole shareholder. I should have created a loan to shareholder as I used business funds to payoff the previous owner. I created it this year well after the purchase and am able to payoff the loan in a single transfer from my personal bank account to my business bank account all within one fiscal year. After waiting 61 days, I want to return part of the payoff by issuing a lump sum stock dividend, reporting it via 1099. The rest of the payoff would need to be a return of capital. Is the return of capital reported on a certain 1099? Does this lump sum payoff create IRS and bank red flags if accomplished within one fiscal year?

[Mike9241]

I may not be understanding correctly what was done to buy out the former owner. if you used the corporate funds to buy out the former shareholder the credit would have been to cash and the debit to treasury stock. This would not affect the basis you have in your stock.

if you use personal funds, that would seem to have nothing to do with the C-corp accounting. if you were not an owner previously your basis would be what you paid. This does not get recorded on the corporation's books. 

seek professional avie to go over what was done.