effi wrote:

- quote -

There are so many possible issues here, you should really
talk to a tax advisor who could then ask you a lot of
questions to get answers that would help him/her arrive at
the best answer.

Generally, loans to a C-corp do not give you basis. The
owner would have basis in the note. However, the note is
non-existant but that does not mean the owner could not
prove the substance of the events. Additionally, a
shareholder can forgive a note and make an election to treat
it as a contribution to capital (thus giving the S/H basis
in the corporation). In this way the corporation does not
have cancellation of indebtedness income.

Further, we don't know if the C-corp is insolvent, has zero
assets (as opposed to liabilities greater than assets),
etc., etc., etc. So, we cannot know the effects of a
dissolution / liquidation.

- quote -

The trust has basis in the note, not the corporation. The
trust must make attempts to collect before taking the bad
debt deduction.

Again though, with intertwined ownership / benificiary
issues, a face-to-face with a tax advisor would be the best
move.

Peter C. Gatto, CPA

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

"effi" <effi[at]ev1.net> wrote:

- quote -

If there was no capital contribution to the corporation and
just loans, the IRS may well want to treat it all as a
capital contribution. Otherwise it seems to me that it
would be treated as a bad debt loss. Whether you can treat
that as a business bad debt is another question.

- quote -

It really depends on all the circumstances. This is not a
simple question.

Stu

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

If an owner in a c corporation has loaned monies to the c
corp., and those monies are not evidenced by anything in
writing, other than being posted on the c corp's. general
ledger as a payable, does the owner have basis in the c corp
which can be deducted if not repaid by the c corp upon it
dissolution?

What if the owner is a beneficiary of a trust which is owed
monies by the c corp, evidenced by written loan documents,
does the owner/trust beneficiary have basis in the c corp
which can be deducted upon dissolution of the c corp?

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >