Schedule C, where to put proceeds from a loan to a company?

[jeffferysr]

A client borrowed money from a bank to help the business.  Where do I show those bank proceeds on his schedule C, or where do I show the proceeds?

[jeffmcpa2010]

<sacarsm font on>Dig out an old "Introduction to accounting" text book and read the chapter on reporting loans as income.....<sacarsm font off>

[qbteachmt]

Two issues:

You cannot loan to or borrow from yourself, for a Sched C entity, because you and that entity are the same. There is nothing to report, except if the loan proceeds are used for a business reportable activity, then the interest might qualify for business expense.

No one reports loan proceeds as other than being in debt. Don't confuse Banking and Income as if they are synonyms.

[IRonMaN]

"No one reports loan proceeds as other than being in debt"

But unfortunately a lot of people try since this is far from the first time this question has been asked. 🤔

[qbteachmt]

"But unfortunately a lot of people try"

I've always found that odd; as I teach in my class: "Do you really want to report the money you loaned to your business as income and pay taxes on it?"

When you put it like that, it usually helps them see the flaw.

[PATAX]

@IRonMaN there are also many business owners that think when they sell their business that the loans that they pay off with the business sale proceeds will reduce their gain...

[IRonMaN]

Yeah, I think they teach that someplace because they all seem to think that.

[sjrcpa]

And when they sell their house, the amount used to pay off the mortgage reduces the gain.