LLC Recourse Loans

[ksfcpa]

Sole Owner of "C" corp is having the C corp loan money to an LLC (of which he in 75% owner) Money is transferred directly from C to LLC
Loan paper (between "C" and LLC) are not collateralized by any equipment just guaranteed by him (75% owner) personally
Is there anything in the IRS code that would disqualify the loan as recourse on his K-1 from the LLC?
Everything I read leads me to believe the loan is recourse due to the personal guarantee.
Concerned is there my be a statues that would nullity this because of the relationship.
The LLC in only in it's first full year of business and has a big loss.
His adjusted basis with the recourse loan would basically reduce his 1040 to zero taxes.

Thanks in advance for your help and comments.
Karen

[JG EA]

Sole Owner of "C" corp is having the C corp loan money to an LLC ...
Thanks in advance for your help and comments.
Karen

Well, you need some others posting here, but I'll take a shot. Isn't the client only personally guaranteed to repay loan to the corp? He's not required to pay it back to the LLC?

[Bees Knees]

If I understand the question, you want to know if the 75% LLC owner has at-risk basis in the LLC loss due to the fact that the LLC owner has personally guaranteed the debt.

The answer is yes. The LLC owner has personally guaranteed the debt between the C corp and the LLC. If the C corp cannot collect because the LLC defaults on the loan, the LLC owner has to pay back the C corp out of pocket. Thus, the reason for the LLC owner being at-risk. The fact that the C corp and LLC are related is irrelevant.

[ksfcpa]

LLC Recourse Loan

LLC member is quaranteeing the loan being paid back to the corp should the LLC not be able to pay it.
I feel more comfortable knowing that the close relationship is irrelevant.
Hope everyone is happy to see the 15th is almost over. Time for some R & R.
Thanks again.