Let me see if I have the facts straight (some assumptions by
me included):

You borrowed $100,000 giving a 2nd mortgage (HELOC) on your
personal residence as security.
You loaned $100,000 to your wholly owned corporation.
You borrowed $30,000 from your wholly owned corporation.
The corporation is paying the interest on the HELOC
directly to the bank that loaned you the money.
The corporation is not paying you any interest and you
are not paying the corporation any interest on the loans
you and the corporation made each other.

Your questions are:

How do you report the loan by you to the corporation on the
corporation's tax return?

How much interest does the corporation get to deduct.

Others may have more to say but here are the problems I see.

The corporation has zero deduction because the interest
payments it is making on your behalf are dividends to you.
You have taxable dividend income for those interest
payments. You have no interest deduction for the interest
being paid by the corporation to the bank.

You have imputed interest income on the net $70,000 you owe
the corporation with a corresponding increase in the tax
basis of your investment in the corporation. The
corporation may have a deduction for the same amount.

How to report the loans between the corporation and you on
the corporate tax return is the least of your problems.

There may be more.

Good luck.

Regards,
Bill Brown

<< ================================================== ===== > << 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. > << ================================================== ===== >

I have a line of credit taken on my house of $100,000. I
loaned this money to my corporation, and then I borrowed
some of it back ($30K). Would I set up a loan from officers
for $70K on the corporate tax return (or 100K)? Also, would
the interest paid to the bank by the corp. be deductible (or
only 70%)? I would appreciate any help on these questions.
Thanks, Denise

<< ================================================== ===== > << 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. > << ================================================== ===== >