Taxpayer paid $1,000,000 for controlling interest in an S corp. ($100,000/yr for 10 years).
This installment purchase means that interest must be imputed.
Assume for purposes of discussion that the imputed principle is $700,000 and the taxpayer paid $45,000 in interest during the current year.
How does the taxpayer deduct the $45,000?
1. Won't be on the K-1. Has nothing to do with the operation of the S corp, as the corp is not involved in the loan itself.
2. Won't be on Form 4952. Reading the definition of "investment interest", clearly does not include an investment where the taxpayer is heavily involved in operations.
I think I've asked this question before, and the proper place would be on line 28 of Schedule E, similar to where s. 179 expense is deducted. However, this deduction would not come from the corporation itself.
Is this correct, and can anyone provide a cite?
This installment purchase means that interest must be imputed.
Assume for purposes of discussion that the imputed principle is $700,000 and the taxpayer paid $45,000 in interest during the current year.
How does the taxpayer deduct the $45,000?
1. Won't be on the K-1. Has nothing to do with the operation of the S corp, as the corp is not involved in the loan itself.
2. Won't be on Form 4952. Reading the definition of "investment interest", clearly does not include an investment where the taxpayer is heavily involved in operations.
I think I've asked this question before, and the proper place would be on line 28 of Schedule E, similar to where s. 179 expense is deducted. However, this deduction would not come from the corporation itself.
Is this correct, and can anyone provide a cite?
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