Just want to make sure I’m doing this correctly. I picked up a new cash basis S-Corp owned by a 100% sole shareholder. This individual has loaned approx. $200K to the company and is accruing interest on the books of the S-Corp. Note, the interest was accrued at 6% but not paid. I’m not sure if a formal note is executed. I assume that the S-Corp does not issue a 1099-INT, right? Also, the interest would not be deducted on the S-Corp given it being on the cash basis. Am I missing something such as constructive payment?? Thanks for your assistance.
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"The hardest thing in the world to understand is the income tax" - Albert Einstein -
Actually Using the Hybrid Method
Ok, problem solved. I recall now upon looking at the return again that the S-Corp is under the Hybrid method of accounting. Thus, the accrual of interest without the actual payment being made. Still need to prepare 1099-INT.
Have a good weekend everyone!!"The hardest thing in the world to understand is the income tax" - Albert Einstein -
Couldn't find it in TTB
Best to read Code Sec 267 dealing with losses, deductions between relaed parties.Comment
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