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Old 09-08-2011, 11:48 AM
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Paying C-Corp Interest only load

My buisness partner and I are paying an interest only loan on some property we own, so we both put money into the company account about every 4-6 months. How do I show that on my taxes or do I?

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Old 09-09-2011, 03:59 AM
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“My buisness partner and I are paying an interest only loan on some property we own, so we both put money into the company account about every 4-6 months. How do I show that on my taxes or do I?”---> I guess it depends on the situation; if the property that you own with your partner is just for personal use, then Home mortgage loan interest can be deducted on fomr 1040 SCh A from your income and significantly reduce your taxes( as long as your itemized deductions are greater than your standard deduction). Mortgage interest on a second home can also be deducted. A business account primarily keeps track of a company's cash flow and transactions. Using the same bank account for your business and personal needs is commingling that is a bad idea;many recommend keeping the two income streams separate. Commingling business and personal money can be dangerous for corporations and limited liability corporations. If legal action is taken against the company and commingling is discovered, personal assets can be held liable.
Interest payments you pay on business 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, car loan, or real estate mortgage. Nor does it matter whether the collateral you used to get the loan was business or personal property. As long as you use the property for business purposes, the interest you pay to get that business property is a deductible business expense. Since you are filing as a C Corp, it would be filed as business expenses in the income statement and to figure out the overall tax liability of the company.
I am NOT sure if this is your situation, however, if the property is NOT for business purpose(i.e., for rental use as your passive investment instead of using yourselves), and you used your C corp to buy the property( I mean C corp owns the property and you related to the corporation and you pay yourselves rent during the year from the C-Corp business, yet the pty. is on the Corporation's balance sheet), then Since you are actually related to the corp, for example, you are employees or officers of the C-corp, that makes me think that the rent payments are compensations for you. in that case, then C corp should issue you 1099-MIScs to report your income, and you need to report them including mortgage interest payments on Sch Es and 1040s. As I assume that the property was purchased after 1986, the property is NOT subject to sec 1250 rule but it is still subject to unrecaptured deprecation on real estate, 25% rate rule when you dispose of the property.A closely-held C corp with rental property is subject to passive activity rules; Generally, you can only deduct passive activity losses( If you have) from passive activity income, with excess losses being carried over to future tax years to offset future passive income. Closely held C corporations are exempted from this rule. Closely held corporations can offset net active income with passive activity losses.



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