Tilted Forum Project Discussion Community - View Single Post - S-Corporation Basis Question

BonesCPA · 10-12-2004, 01:11 PM

Briefly:

If you "sell" the equipment to your corporation in exchange for a loan, then you can depreciate the equipment over their useful lives. Used equipment can not take Section 179 depreciation. (If that is Greek - talk your your tax advisor.) The loan to the corporation is not income when the funds/equipment are received. Likewise, when the loan is paid back it is not a deduction.

eg. You loan the corporation $10,000 to purchase office supplies, postage, etc. (Similar to your situation, but let us assume this is all immediately dedcutible.) The corporation has no other income or expense during the year, you will have a $10,000 loss that will pass through to your personal return.

Year 2 you have $25,000 of income and no expenses. You pay back the loan and still have $15,000 sitting in your account at the end of the year. Your taxable income would be $25,000 since paying back the loan is not deductible. (Ignore interest on the loan, etc.)

Summary:Yes, you can have a loss based on tranferring the equipment to the corporation in exchange for a loan, but no, there is tax consequences for paying back the loan since there is no deduction for the loan payment.

10-12-2004, 01:11 PM	#2 (permalink)
BonesCPA No. It's not done yet. Location: sorta kinda phila	Briefly: If you "sell" the equipment to your corporation in exchange for a loan, then you can depreciate the equipment over their useful lives. Used equipment can not take Section 179 depreciation. (If that is Greek - talk your your tax advisor.) The loan to the corporation is not income when the funds/equipment are received. Likewise, when the loan is paid back it is not a deduction. eg. You loan the corporation $10,000 to purchase office supplies, postage, etc. (Similar to your situation, but let us assume this is all immediately dedcutible.) The corporation has no other income or expense during the year, you will have a $10,000 loss that will pass through to your personal return. Year 2 you have $25,000 of income and no expenses. You pay back the loan and still have $15,000 sitting in your account at the end of the year. Your taxable income would be $25,000 since paying back the loan is not deductible. (Ignore interest on the loan, etc.) Summary:Yes, you can have a loss based on tranferring the equipment to the corporation in exchange for a loan, but no, there is tax consequences for paying back the loan since there is no deduction for the loan payment. __________________ Back into hibernation.