Level 11
09-23-2020
03:41 PM
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You're asking if some or all of the interest paid by 2 to 1 constitutes self-charged interest to the shareholder of 1? I think you're going to have to do the research there; I sure as heck wouldn't rely on some internet rando for such a fact-specific issue.
If it constitutes self-charged interest, does it increase the shareholder's basis and at-risk in 1? Sure, same as any other item of income or gain. Its characterization as portfolio or passive under the self-charged interest rules doesn't affect that conclusion.
Does an increase in the shareholder's basis and at-risk in 1 affect that shareholder's ability to use prior suspended (for lack of basis and/or at-risk) losses in 3? No, basis and at-risk are specific to a given entity.