Arthur Kamlet <-To[at]panix.com> wrote:
- quote -

Unfortunately that is true. It is also the reason that,
in my next life, I will only marry orphans.

- quote -

That is an excellent point. But, it should be noted
that there is nothing per se improper with related
party loans. It is just that they are an opportunity
for fraud and the IRS is expected to view them with a
jaded eye.

Dick

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In article <ge37sp$929$1[at]reader1.panix.com> ,
Dick Adams <rdadams[at]panix.com> wrote:
- quote -


And, as the saying goes, once a mother-in-law, always a mother-in-law.

Once someone is a related party, that person stays a related party
even if there's a death or divorce. Once a m-i-l, always a m-i-l.
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

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

The term "nefarious" was intended to include both
extra-marital affairs and co-conspirators.

Common-law spouse has a legal definition. The Census
Bureau term is POSSLQ (pos ul Q) or "Persons of the
Opposite Sex Sharing Living Quarters". OTOH an
extra-marital affair is a PSJ (Periodic Shack Job).

But in the end, a related party is whomever the IRS
says it is - unless and until a judge says different.

Dick

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Dick Adams wrote:
- quote -

"nefarious"!!!

relationships, your business
- quote -



please elucidate as to what constitutes such.
common law wife?
POOSLT?
POSSLT?

(grin)

ChEAr$,
Harlan Lunsford, EA n LA

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nish <nisha[at]nunya.org> wrote:

- quote -

The IRS looks skeptically at related party loans. So who
is a related party? Answer: for openers, it includes you,
your family, your nefarious relationships, your business
partners, and people to whom you money outside of the
Corp receiving the loan.

The simple question is "Why would an economically rational
person borrow at a interest rate higher than the nominal
rate at which he could borrow?"

So on audit, the IRS will most likely question the
substance of high interest rate loans and may allocate
the excessive interest as income to the Corp and as
dividends to the lender.

Dick

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"nish" <nisha[at]nunya.org> wrote
- quote -




The IRS would allow deductions for interest that is obviously business
related, but tey also look at the loan from the "ordinary and necessary"
standards and in the case of related "friendly" parties, they'd look at
reasonableness. 15 - 20% with a credit card company is one thing. 20% with
a related party might be something else entirely. If banks are loaning (a
big IF these days) at 8%, then a loan with a family member or business
associate shouldn't be much greater than that.

They'd also look at the economic substance of the loan transaction to see if
there is intent to shift, defer or otherwise evade taxes. If I gave my
grandchild $12,000 and then borrowed that amount from her at say, 24%
interest, they'd have things to say about it.





- quote -

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- quote -


If the loan interest rate exceeds the amounts allowed under State usury
laws, is this something the IRS will try to enforce? Or is the only risk
of such a loan from an audit by the State tax authorities? If the loan is
between friendly parties, I have a hard time understanding whether there
would be any enforcement of usury laws.

If you want to avoid the hassle of executing separate loan documents for any
incremental loans between the two parties, can you just execute one document
that extends a line of credit that is for an amount larger than the sum of
the individual loans? If such a line of credit document exists and meets
the various tests for being a legitimate loan document, will this do away
with the need for further documentation each time a check is written from
the person to the corporation? Perhaps the check memo could reference the
"LOC Dated 9/9/2099"?

nish

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