EC SD | reformedbanker - 1/27/2024 14:58
How would an operator who never touches $0 on an LOC do this legally? To not apply grain, livestock, crop insurance, etc proceeds to the LOC is technically "selling out of trust". Then, since they never touch $0, how would they live if they cannot ask for an LOC advance to cover any family living expense? Many operations never touch $0 on short term debt collateralized by blanket security agreement.
Are they simply supposed to not deduct their interest on this loan since it's proceeds were not 100% business?
If that is the case, a whole lot are not filing taxes correctly.
Edit add: You know what? I found the answer. The Tax Cuts and Jobs Act of 2018 closed this loophole. Technically they should allocate family living advances and proportionally not deduct this. If business is seperate, you can leverage the business and take owner withdrawal / pay. Not sure how that may apply to sole proprietor.
Agreed, and interest deductibility rules seem the same for sole proprietors and passthrough entities like S-Corp and LLCs. Here is the link in the IRS pubs:
https://www.irs.gov/publications/p535#en_US_2022_publink1000243081
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Save on operating interest or invest in mutual funds?
