1099-INT from owner to SMLLC

[Gretel]

I was under the impression that you cannot make a loan to yourself. However, there are plenty of articles suggesting that you can and I did not find anything that says you cannot. I find information spelling out the effects of self-charged interest but it seems they refer to the other entity not being a disregarded entity. Is there a tax law that disallows this? I am not inquiring about the legal/state side, I believe it's pretty clear that you should have a legal contract between yourself and your LLC.

Now, here is my dilemma: If a LLC that owns a rental property pays interest to the owner, is this reported on a 1099-INT? If the answer is yes and I follow the 1099 instructions for disregarded entities than I would issue one from Owner to Owner using the SS no?

[Burke]

Now, here is my dilemma: If a LLC that owns a rental property pays interest to the owner, is this reported on a 1099-INT? If the answer is yes and I follow the 1099 instructions for disregarded entities than I would issue one from Owner to Owner using the SS no?

Is this a SMLLC or are there other parties involved? I am assuming this is not mortgage interest.

[Gretel]

Burke, this is a SMLLC, Schedule E. Mortgage interest was a consideration but the owner did not want to jump through the hoops of ensuring the correct language in the loan agreement. Per loan agreement the real estate is not used as collateral with a recorded deed but is included in the language of the loan agreement as part of what the LLC owns. What is the importance of this? Also, the issue of who is sending the form to whom is the same.

[Burke]

Not sure what the significance of "is included in the language of the loan agreement" actually means. Do you have the operating agreement of the LLC? So the loan is uncollaterlized, an unsecured personal loan? Does the LLC have an EIN?

[Gretel]

Not sure what the significance of "is included in the language of the loan agreement" actually means. Do you have the operating agreement of the LLC? So the loan is uncollaterlized, an unsecured personal loan? Does the LLC have an EIN?

Everything the LLC owns is pledged against the loan, which includes the real property but there is no lien recorded. Yes, I do have the OA and yes, there is an EIN. None of the LLC's has employees, so I believe the EIN should not be used on tax forms.