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Old 04-20-2017, 03:35 PM
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Paying LLC loan with personal checking account

I am a partner in a LLC. We make once-per-year distributions to ourselves. We have also borrowed money and have once-per-year payments on the loan (P&I). Sometimes we have enough in the LLC's bank account to cover the loan payment, other times our distributions are too large and we don't leave enough in the LLC account to cover the loan payment. When that happens, we write a personal check to the LLC to cover the loan. Because we are a partnership and receive a K-1, we use Schedule E. Is there a place on my taxes to account for that personal check? Is it a business expense? Is it an expense to offset the distribution? Or is it nothing that I can use to reduce my tax burden? Thanks



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Old 04-21-2017, 02:50 AM
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I am a partner in a LLC. We make once-per-year distributions to ourselves. We have also borrowed money and have once-per-year payments on the loan (P&I). Sometimes we have enough in the LLC's bank account to cover the loan payment, other times our distributions are too large and we don't leave enough in the LLC account to cover the loan payment. When that happens, we write a personal check to the LLC to cover the loan. Because we are a partnership and receive a K-1, we use Schedule E. Is there a place on my taxes to account for that personal check? ========. You can deduct all interest the LLC pays on a loan it uses to fund the purchase of business assets or to pay operating expenses or etc. Since the LLC is subject to partnership taxation rules, each partner can deduct the portion of interest that reflects his respective investment in the partnership.

Is it a business expense? Is it an expense to offset the distribution? Or is it nothing that I can use to reduce my tax burden?=======> As an owner, your company may not pay for every expense you incur on its behalf. Your out-of-pocket costs may be legitimate business expenses that you?ll want to deduct. Out-of-pocket business expenses that an owner is required to pay on behalf of the entity are an offset to business income; they are subtracted on Sch E (the deduction is labeled ?UPE? for unreimbursed partnership expense). There are no separate limitations on these deductions as there are on business deductions claimed by memebrs on Sch A. However, as the Tax Court has pointed out , no deduction is allowed for the owners if the entity would have paid the expense under the terms of the partnership agreement or past business practices but the owners failed to ask for reimbursement.



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Old 04-21-2017, 04:03 PM
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Thanks for the reply. So the UPE that I declare is only the interest on the loan that I paid from my personal checking account. Even though I also paid the principal, the only UPE is the interest. Is that right? Thanks.



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Old 04-22-2017, 02:54 AM
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Originally Posted by mongoo999 View Post
Thanks for the reply. So the UPE that I declare is only the interest on the loan that I paid from my personal checking account. Even though I also paid the principal, the only UPE is the interest. Is that right? Thanks.
Correct only interest portion that yu paid; you can deduct all interest the LLC pays on a loan it uses to fund the purchase of business assets or to pay operating expenses or etc as said. Since the LLC is subject to partnership taxation rules, each partner/memeber can deduct the portion of interest that reflects his respective investment in the partnership



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