Thanks to all!!!!

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Harlan Lunsford <lunstax[at]bellsouth.net> wrote:
- quote -

FWIW, there's a short but cryptic paragraph of instructions
from the Form 1120S Schedule K-1 Line 21 that tells you some
of the things that you should read if you've got a repayment
of a "reduced basis" loan from an S corporation.

Here are those instructions:

"Line 21..
If the line 21 payments are made on a loan
with a reduced basis, the repayments must be
allocated in part to a return of your basis in the
loan and in part to the receipt of income. See
Regulations section 1.1367-2 for information
on reduction in basis of a loan and restoration
in basis of a loan with a reduced basis. See
Rev. Rul. 64-162, 1964-1 (Part 1) C.B. 304 and
Rev. Rul. 68-537, 1968-2 C.B. 372, for other
information."

If you don't have a "reduced basis" loan, my guess is that
there's no income and nothing to report. You get a "reduced
basis" loan when you have deducted your losses from the S
corporation, and those losses are greater than your basis in
the corporation's stock.

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Harry Boscoe wrote:

- quote -

Harry, I like the way by which you think!

Cheer$,
Harlan Lunsford, EA n LA

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The repayment of a shareholder loan will be taxable (or
partly taxable) any time the shareholder has deducted losses
from the S corporation in excess of his (her/their/its...)
basis in the stock of the S corporation. IIRC, the amount
of the repayment that is taxable is treated as a capital
gain (short- or long-term) and should be reported on your
Schedule D, just as if you had sold a capital asset for more
than your basis in it.

The tricky part is deciding what calculation to use in
deciding what part - if it's only a part - of the loan
repayment is taxable. IRS says that you are to split the
repayment so that you recover your basis (the non-taxable
part of the repayment) in the loan prorata, based on what
fraction of the loan you still have basis in.

There, I ended a sentence with a preposition, which usually
means I've reached the bottom of my bucket of knowledge.

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Meredith wrote:

- quote -

Although some might argue that you should have provided for
interest payments, rest assured that loan repayments are not
income to you.

Cheer$,
Harlan Lunsford, EA n LA

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"Meredith" <shalldan[at]ix.netcom.com> wrote:

- quote -

If the S Corp passed through losses to you then the
repayment of a loan may indeed (under certain circumstances)
trigger a taxable event. However the repayment of a loan in
and of itself is normally not a taxable event and does not
and should not be reported on your personal income tax
return.

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shalldan[at]ix.netcom.com (Meredith) wrote:

- quote -

It's not income, so it's not reported or taxed.

Now, if you had deducted it all when you loaned it to the
corporation, then it might make sense to claim it as income
now. But what you should do is go and amend the return you
made for the year you made the loan.

Stu

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I am one of 2 equal shareholders/owners of an S Corp, to
which I lent $$. The corp. paid me back. No interest was
involved. I can't figure out where/how to report this
income on my personal income tax.

Thanks,

Meredith

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