Do you have to combine loans? And do related party rules affect this?
Shareholder A loans new S corporation $25k at interest rate > AFR. Shareholder A also pays for $8500 of start up expenses/fixed assets from own pocket. We want to treat this as a loan also. The way I read the Sec. 7872 imputed interest rules, we need to pay interest on the second $8500 loan as well (even though it's <$10k) because in aggregate the loans between the S corp and Shareholder A are more than $10k. Am I reading this right? Does it make a difference if the intent is to have this smaller loan repaid by the end of the year (i.e. loaned & repaid within same year)?
Second shareholder B (S/H A's son) also pays $5k of start up expenses/fixed assets. I believe no interest needs to charged, since < $10k. Correct? I always worry about related party rules lurking in the background in cases like these.
Shareholder A loans new S corporation $25k at interest rate > AFR. Shareholder A also pays for $8500 of start up expenses/fixed assets from own pocket. We want to treat this as a loan also. The way I read the Sec. 7872 imputed interest rules, we need to pay interest on the second $8500 loan as well (even though it's <$10k) because in aggregate the loans between the S corp and Shareholder A are more than $10k. Am I reading this right? Does it make a difference if the intent is to have this smaller loan repaid by the end of the year (i.e. loaned & repaid within same year)?
Second shareholder B (S/H A's son) also pays $5k of start up expenses/fixed assets. I believe no interest needs to charged, since < $10k. Correct? I always worry about related party rules lurking in the background in cases like these.