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Intercompany loans between Corp & LLC

I have a client that is wanting to loan money from his Corp to his LLC. Does this have to be an interest bearing loan? What would the tax implications be on this transaction? Both companies are US based.

Answers

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

Do they file one tax return? If they do and both of these entities are in the US, it wouldn't matter. If the loan crossed country borders, you should be charging interest and it should be documented, unless the intent is essentially an equity infusion. If there are separate entities, this should be documented and interest should be charged on an arms length basis.

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