Shutting down an S corp, shareholder loan

[Skate1968]

I have an older client, chiropractor, who doesn't do the business that he used to. He no longer has any employees other than himself.

He, the shareholder, owes his corporation a few thousand. Could i close the corp and then pick up the loan as income -- debt forgiveness? Would the IRS be OK with that?


(i'm thinking of switching him to an wholly owned LLC. He's small. And I don't believe he needs a corporation anymore.)


thanks for reading

[Roland Slugg]

Pay the loan

IMO he should repay the loan. Keep everything clean.

[Skate1968]

Thanks for responding, Roland.

My original thought was based on the fact that he can not easily repay the loan at this time. But after reading your post it occured to me that after he reapaid the loan he could receive a big corp distribution and or/payroll. So he could, basically, repay the loan if he, the shareholder, were to receive a decent chunk of change immediately after.

I just got done moving firewood and drinking beer with the neighbors. Hence i don't have any brainpower at the moment. But at this point it appears as though my problem is solved.

[JON]

If no business

you just close down the corporation and make the entries. Assuming all you have is cash and due from stockholder(everything else done) you credit cash and due from and debit capital stock and retained earnings. This should give you a 0 for a balance sheet.