The IRS recently acquiesced in result only in the case of Scott Singer Installations v. CIR, TC Memo 2016-161. Mr. Singer had loaned his wholly owned corporation funds to stay afloat during hard times. The corporation made advances to Mr. Singer for payment of certain personal expenses. The taxpayer contended the advances for personal expenses were repayment of loans whlle the IRS argued they were compensation. The court found the payments were in fact loans because the taxpayer had acconted for them as such on his personal returns and it concluded there was a general expectation of repayment of amounts loaned. This case again shows the importance of documenting related party loans and properly accounting and reporting them. Loans should be documented, bear adequate interest, and collateralized. The IRS will only respect a loan as such if the taxpayer does as well.
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