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When A TP Purchased a C-Corp, he invested into the company his own monies through the years. Now that he is thinking of selling the C-Corp, he wants to get his personal invested money back out of the company that is not a part of the sale. How do I handle this transaction? Technically, through the years he "loaned" his personal money to the C-Corp, now he is thinking of selling the C-Corp someday down the road, so he wants to get his money back. Can this be done?
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Before closing, the corporation repays the loan.
The more I know the more I don’t know.
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"Technically, through the years he "loaned" his personal money to the C-Corp"
What to you mean by "technically". Is the money showing up as a loan or did it get coded as equity?
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Yes I believe it did
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It did which?
The more I know the more I don’t know.
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the bookkeeper put the money in the equity account in QB.
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Then he didn't "loan" the money. He invested the money and he will get it back once he sells the business - the money is part of his basis in the corporation's stock.
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Do I handle it that way even though it was a mistake which was caught when I was asked ti prep the books for sale?
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Are there signed loan agreements indicating that the money was loaned to the business?
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No sir, this is a very small corp. when the money was needed, he would just transfer into the bank account.
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If it was reported as equity on prior tax returns and there aren't any documents indicating that they were loans, I think he is stuck with equity.
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