Money hits the business bank account. There is no contract, no promissory note, no invoice. Everyone involved knows what the money is for, and everyone assumes the paperwork will get sorted out later. This happens all the time in deal-driven businesses. Two people who have worked together for years agree to fund a purchase. One…
Category: Loans
When Does a Promissory Note Create Basis in Controlled Company Stock?
Business owners have choices in how to fund their corporations. Should they contribute cash? Property? Perhaps a promissory note? There may be some benefit of using a promissory note. You get stock in your company without immediately parting with cash or other assets. The promissory note sits on the company’s books as a receivable, and…
What is a Bona Fide Loan for Tax Purposes?
It is often said that a taxpayer is free to structure their affairs as they see fit and can even do so in a way to minimize or avoid paying taxes. While this is true, it is equally true that the IRS is not bound by the taxpayer’s characterization of transactions. The IRS has a…