Article Date:
December 2010

Word Count:



Tax Tips for Making Business and Personal Loans Correctly

What makes the IRS automatically suspect that a loan may not be a true loan?


Answer: The loan is suspect when you make that loan to your wholly owned corporation or to your brother, mother, or grandfather.


If the loan is not a true loan because you improperly documented it, executed it, or otherwise failed to prove loan status, then it is a fake loan for tax purposes.


Fake Loan to Your Corporation


The problem with a fake loan to a corporation or other business entity that you own is that the dollar amount of the fake loan becomes a capital contribution.


Fake Loan to Your Mom


If you make the fake loan to your brother or mother, it becomes a gift for tax purposes.


Big Difference


When you make a valid loan that does not get repaid, you deduct your loss in full as a bad debt.


When a ... Log in to view full article.

Log in to view full article

Already a subscriber?

Email Address


Log In Send me my password

You'll be able to read the full article and get instant access to the last few issues of the Tax Reduction Letter

Not yet a subscriber?
with a money-back guarantee