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Business Debt/Is an S Corp business line of credit repayment treated as an "Expense" (reduction of income) on the shareholder's personal tax returns?

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Expert: - 3/30/2011


Question
Hi.  My family owns an S Corp that incurred $125K loan (over the last couple yrs) in a business line of credit.  The loan was personnally gauranteed by us.

Tax year 2010 was a fair income year, and the business earned enough income to pay off the loan in full.

Question:  Does this 125K loan repayment have to be reported as "income" on the shareholder's personal tax returns (even though it wasn't distributed income)?  Or can it be treated as a business "expense", therefore reducing the Co's overall income tax liability?

Answer
Randie:
Thanks for the question. I am not a taxation expert, however if the loan was taken and repaid by the business and for its use, than a personal guarantee (only required by bank in case of default) and has no influence on how you will claim it. It is a business expense, not income and can likely reduce the company tax liability. To be absolutely sure discuss this with your tax advisor.

Thank you.

Christine Janklow  

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Christine Janklow

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As President of SettleSource,Inc. a business debt settlement firm, I invite you to inquire about all aspects of business debt solutions to best determine which may be most appropriate. If you have questions such as: What is debt settlement and how process provide debt relief to my business? What options are available to deal with my business debts? Is it possible for a business owner to negotiate their own settlements? Why is debt settlement preferable to filing a bankruptcy or debt consolidation? Why are creditors willing to provide settlements to a business? How will settling debts affect credit scores? or How to rebuild a business after debt is eliminated. Please ask it now! For more information regarding how debt settlement can help your business, please visit www.SettleSource.com and place your inquiry. Mention All Experts to have a confidential no cost consultation with Christine. If this is your business situation time may play a very important factor in getting matters resolved proactively before they have negative affects on the business.

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My expertise is specific to providing business solutions that will have profound positive impacts on the financial health of businesses. I have 25 years experience as an entrepreneur and have developed national sales programs; strategic alliances; product development; marketing programs; business and turnaround plans and debt settlement programs all providing methods to improve the financial outlook for large and small businesses. In the area of commercial debt settlement I have over 10 years experience working with large and medium corporations and closely held businesses to enable successful debt reduction and turnaround. I am a professional debt arbitrator and have negotiated with major banking institutions as well as vendors, suppliers and other trade creditors.

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Provisors;Turnaround Management Association; Los Angeles area

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Accounting Today; Web CPA; National Restauarant Association;Los Angeles Daily News; Today Magazine Monthly series of business articles entitled "Brand News."

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Bachelor of Business Administration; Associate of Arts Merchandising

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American Airlines, American Express, Safeway Inc., New York Life, consumer products manufacturers; retailers, food service industry and other small businesses and service providers.

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