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Tax Effective Business Loan

What is the most tax effective way to give a personal loan to a business?

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Richard Stumpf
October 16, 2020

A loan is not a taxable event.  Paying back the loan is.  For the business to deduct the interest paid, it must be taxable to the loan maker.  If no interest is paid, the IRS can impute interest anyway, ie you give a loan to your son to start a business, and don't charge him an interest.  The forgiven interest is still considered to be taxable interest income to you.  Most of all, document, document, document.

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