Business Services Industry
Open account debt for S shareholders.
Tax Adviser, The, August, 2007 by Sobochan, David
On April 12, 2007, the Service issued proposed amendments to Hess. Sec. 1.1367-2 and -3 (REG-144859-04), to address concerns about the treatment of S shareholders' open account debt.
Background
Regs. Sec. 1.1367-2(a) states that open account debt is a shareholder advance that is not evidenced by a note. Typically, open account debt refers to a situation in which multiple loans are historically made from a shareholder to a corporation throughout the year.
Repayments and advances are treated differently for open account debt than for a shareholder loan evidenced by a note. For debt evidenced by a note, additional advances made by shareholders constitute new loans. Advances for loam considered open account debt are treated as additions to the...
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