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DEBT VS. EQUITY IN CLOSELY HELD ENTITIES

Under the link below is a superb post from FarrellFritz on the issue of when an investor’s transfer of cash to a closely held entity is debt and when it is equity for federal tax purposes.  In my LLC practice, this issue arises often.  Perhaps also in yours.  In any event, you should know the rules and advise your clients about them—they have to characterize these transfers clearly in proper documents and comply with the terms of the documents.

Here’s the link:  http://www.taxlawforchb.com/2017/09/debt-vs-equity-form-substance-matter/

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