Google Answers Logo
View Question
Q: personal income tax ( Answered 4 out of 5 stars,   3 Comments )
Subject: personal income tax
Category: Business and Money > Accounting
Asked by: doctorbones-ga
List Price: $10.00
Posted: 30 Jan 2006 16:58 PST
Expires: 01 Mar 2006 16:58 PST
Question ID: 439436
If I receive a personal loan of $30,000.00 (at a 5.7% interest rate)
from a family member for the purpose of funding a small business, and
1) that loan amount is applied [and spent] entirely on equipment and
supporting materials for this business over the course of one year,
and 2) the business has negative income (a loss) for the year, will I
have to pay some amount of tax on this loan?
Subject: Re: personal income tax
Answered By: taxmama-ga on 31 Jan 2006 19:40 PST
Rated:4 out of 5 stars
Dear Doctor Bones. 

The money you received is a loan. 

It's just like any other loan that you take out
from the bank or a finance company. 

So, don't worry. At this point, it's not income.

If you had a double-entry accounting system, the
loan would be a liability on your Balance Sheet. 

Make sure that you pay the interest when it's due.
Or if you must delay the payment, have your family
add an addendum to the loan explaining how the late
interest is it to be handled. Will it be added to the
note? Will interest be charged on it? Put it in writing.

You will only face tax if you never pay the loan back.
Then it will become a cancelled debt - which is either
taxable income, or a gift, depending on your family's
nature. But that's a long way off.

Naturally, your business will succeed. And you'll pay
it all back.

Good luck.

Best wishes,

Your TaxMama-ga
doctorbones-ga rated this answer:4 out of 5 stars and gave an additional tip of: $10.00

Subject: Re: personal income tax
From: markvmd-ga on 30 Jan 2006 19:29 PST
Since when does anyone pay tax on a loan?
Subject: Re: personal income tax
From: respree-ga on 30 Jan 2006 20:04 PST
The most qualified answer will come from your local CPA, but I'll give
you my opinion.

The answer is no.  You do not pay taxes related to interested paid on your loan.

If you meant, "Will I 'owe' (less) taxes," the answer, once again is
no.  This type of interest is not tax deductible on a personal income
tax return.
Subject: Re: personal income tax
From: cynthia-ga on 31 Jan 2006 02:48 PST

SHHHH!!!  Don't give *them* any ideas!  ;-)

Important Disclaimer: Answers and comments provided on Google Answers are general information, and are not intended to substitute for informed professional medical, psychiatric, psychological, tax, legal, investment, accounting, or other professional advice. Google does not endorse, and expressly disclaims liability for any product, manufacturer, distributor, service or service provider mentioned or any opinion expressed in answers or comments. Please read carefully the Google Answers Terms of Service.

If you feel that you have found inappropriate content, please let us know by emailing us at with the question ID listed above. Thank you.
Search Google Answers for
Google Answers  

Google Home - Answers FAQ - Terms of Service - Privacy Policy