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LLC taxes: Loans Payable

musu pura's Profile

I and my wife owns LLC. Personally we(Me and my wife) loaned(Ex: $100) LLC 13 years ago. In 2018, LLC made a profit of $166. Since LLC never made profit last 13 years, there was no money to pay back the loans. Now LLC made money and wants to pay back the loan $100 to Me and my wife.

We see two paths
Path#1: LLC profit is $66. That means LLC will issue a K1 for $66 to me and my wife.

Path#2: LLC profit is $0. If we deduct the interest also since it is 13 years ago we loaned this money to LLC? If we put 4% compound interest, then LOAN+INTEREST is $166. If that is the case, LLC will issue 1099-MISC for $66.

Is both the paths are acceptable from the IRS point of view? Do I have the freedom to choose either?

Since we are a very very small LLC that does not make enough money, we are asking the question here. We bought TurboTax Business software for taxes. Our advance thanks to the responses.


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