Interest Related To Spec Home
Lended S-Corp money from HELOC, used to build spec home.
Question: Is interest paid for HELOC loan by S-Corp just a regular interest deduction, or since it is used to develop the property specifically, it needs to be capitalized.
Should be capitalized.
It seems to me that the principal borrowed from the HELOC could not be expensed by S-corp since it went into capital improvement, however, the interest on the loan ought to be deducted as a business expense.
S corp interest paid or accrued is added to the basis of the home. S corp interest paid or accrued would be interest income to you. HELOC interest would probably be deductible by you if you itemize.
Ok, i am capitalizing interest paid within s-corp for property construction.
So it is capitalized within the s-corp until i sell, i understand that, but do i still deduct it now on my sched A as mortgage interest? Or since it is being paid directly by s-corp to lender (not me) does it just not impact my sched A.
Thought I understood this, but still a little confused.
blueford:
I agree that the interest income I personally receive my company making the payments to me would be reported on my sched B. However, the interest expense paid to me by the the business should be reported as interest expense for it. This would be on the 8825 for a rental property for a 1065.
Right?
Not at all. From the information you provided, it would seem that your advisor was correct.
Seems correct to me, the depreciation is for the recapture
If you can point us to that article, I would like to read it too.