Ms. Knox recently loaned $20,000 to her closely held corporation, which needed the money for working capital. She sees no reason to document the loan other than as a “loan payable—shareholder” on the corporate balance sheet. She also sees no reason for her corporation to pay interest on the loan. What advice can you offer Ms. Knox concerning this related-party transaction?
Answer to relevant QuestionsExplain the logic of the tax rate for both the accumulated earnings tax and the personal holding company tax. Ms. Johnson is eager to create a family partnership to generate income and cash flow for her three college-age children. She owns two businesses, either of which could be organized as a partnership. Ms. Johnson established ...American Corporation has two equal shareholders, Mr. Freedom and Brave Inc. In addition to their investments in American stock, both shareholders have made substantial loans to American. During the current year, American ...Mr. and Mrs. Lund and their two children (Ben and June) are the four equal partners in LBJ Partnership. This year, LBJ generated $36,000 ordinary income. Compute the tax cost for the business if Mr. and Ms. Lund’s marginal ...On March 1, Mr. and Mrs. Trent formed Trent Properties Inc. through which to operate a real estate management business. Both Mr. and Mrs. Trent worked full-time for modest, but reasonable, salaries. In early December, the ...
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