Defending Your Custody Agreement: Protecting Your Education Choices

Defending Your Custody Agreement: Protecting Your Education Choices

Avoid Tax Troubles On Legitimate Loan Claims

by Daryl Young

A lesson can be learned from the trials of former Ultimate Fighting Championship pioneer Royce Gracie, another celebrity dealing with public battle with the Internal Revenue Service. Gracie is facing a number of fraud claims revolving around questionable loans. Allegedly, the loans reflect possible attempts to hide income. Concerns about possible false deductions of loan interest have been raised. The U.S. Tax Code has specific rules in place regarding loans and entrepreneurs should follow additional steps in order to address any claims of fraud by the tax agency.

Legitimacy, Loans and Deductions

There are two major rules in effect when a loan is taken out for business purposes, the interest may be deductible. There must also be a definitive intention to pay the loan back.

For example, a business that purchases a computer on credit for purely business use may take a deduction for the cost of the computer and the interest on the loan. Purchasing a computer for personal use and deducting the purchase and interest as a business expense, however, would be fraud. Also, "lending" someone money with no real agreement for repayment as a form of compensation for professional services rendered may be construed as fraud since the loan may be deemed income.

The following two steps should be enacted to prevent or address IRS troubles:

Create Proof of Business Loans

Anyone hoping to take make loan interest deduction claims should maintain records proving legitimacy. Returning to the previous example of the computer, the browsing history should never be deleted nor should any logs of downloads. Unedited copies of download reports, program files, and internet browsing history could be submitted as proof of legitimacy during an audit. Obviously, no personal software or browsing should be done on the computer in order to ensure the integrity of the claim for business use is not undermined.

Establish the Proof of Repayment

Business to business or person to person loans might seem suspicious to the tax authorities. Assumptions that the loan is a form of income requires proving the money is the former and not the latter. Handshake and verbal agreements won't help in the matter even if both parties are agreeable to such arrangements. Actual written documents detailing the loan and its terms must be crafted. Logs of all repayment transactions must be made. Receipts detailing the date and amount of the payments should be kept. Without clear details of repayment, the appearance of fraud is hard to avoid.

For more information, contact a tax attorney, like Dermot F Kennedy.


About Me

Defending Your Custody Agreement: Protecting Your Education Choices

When my ex-husband decided to contest my choice to homeschool our children, I knew that I had to defend my right as the custodial parent. Our custody agreement gave me authority over educational decisions, but he still took me to court. I spent a lot of time working with an attorney to find out how best to handle it, and I did a lot of research on the laws as they applied. If you're trying to defend your educational choices amidst your divorce, this site may help. I've built it to share everything I learned and explain the process that I went through to secure my rights.