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Old 05-03-2018, 01:54 PM
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Loan Payback

Can I payback an asset loan from company funds? Will I have to report that "loan" as other business income?
Backstory: I bought my father's business, tangible (equipment and location) and intangible (client files, workers, etc) items, from him. I have registered with the state with new name and for payroll as well, have my own EIN. I coded the "loan" in assets, which is for working equipment, computer equipment and leasehold improvements. He says I cannot pay back the loan from the business account as I will have to claim it(the loan) as income and pay taxes.
I thought since it's a loan, the IRS will view as a liability and that the payback is not an expense, just the decrease in loan.

I did not have to obtain a loan to start the business and within a week I started paying him back.
I just want to make sure that I am not doing anything wrong.



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Old 05-04-2018, 05:33 AM
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Join Date: Oct 2010
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Can I payback an asset loan from company funds? Will I have to report that "loan" as other business income?==========>>I think so; Asset-based lending generally refers to a biz using its assets as collateral for a loan. If the loan is not repaid and falls into default, the lender may seize and sell the collateral to pay off the loan amount.so, The asset-based loan is secured by inventory, accounts receivable, equipment, and/or other balance-sheet assets. In general, Interest you pay on biz loans is usually a currently deductible business expense. It makes no difference whether you pay the interest on a bank loan, personal loan, credit card, line of credit or etc for biz real property. Nor does it matter whether the collateral you used to get the loan was biz or personal property. If you use the money for biz, the interest you pay to get that money is a deductible biz expense. It?s how you use the money that counts, not how you get it. Borrowed money is used for biz when you buy something with the money that?s deductible as a biz expense.


Backstory: I bought my father's business, tangible (equipment and location) and intangible (client files, workers, etc) items, from him. I have registered with the state with new name and for payroll as well, have my own EIN. I coded the "loan" in assets, which is for working equipment, computer equipment and leasehold improvements. He says I cannot pay back the loan from the business account as I will have to claim it(the loan) as income and pay taxes.I thought since it's a loan, the IRS will view as a liability and that the payback is not an expense, just the decrease in loan.=========>> most loans are generally not considered taxable income because it?s money that you?re paying back. While there are exceptions, those exceptions apply to loans that are different from typical biz loans from banks or online lenders. You can typically deduct interest paid on biz loans used solely for your biz purposes. I guess this is not your case however,Specific situations may arise in which the entirety of the amount borrowed isn?t used for biz expenses. In these cases, interest paid on the amount used for personal purchases isn?t deductible.



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