Interest income on loan to Shareholder

[tacks86]

I understand that 'technically' one must show intererst income when a Corporation loans money to the sole shareholder. But of course, i certainly don't like showing income if I don't have to.

Someone once told me that it's really not a big deal and not necessary (can't remember if it was a 1065 or an 1120 or what the $$$ amts were).

My thoughts are "throw them a bone." Meaning that if there is both a beginning and ending SH loan balance on the schedul L then i'll show some interest income. But maybe my calculation of interest earned will favor the shareholder.

Any thoughts?

[ChEAr$]

Just suppose

S corp shareholder (president and chief bottlewasher) borrows 1000 from the corporation.
So end of year you attribute 60$ of interest income to the corporation from the
shareholder. What have you got?

Shareholder can't deduct the interest (personal in nature) and corporation has 60$
interest income which passes through to the shareholder.

Duh!

[BOB W]

There is.....

... $10,000 threshold. Less than that is of no interest consequence.

Shareholder loans from an S corp can cause a distribution problem.

[tacks86]

Thanks for responding.