It is important to keep document loans from your corporation. This is shown by a recent court case. The Tax Court has concluded that a husband and wife failed to report constructive distributions from their respective wholly owned corporations, rejecting their claim that these amounts represented shareholder loans. The taxpayers took funds from their corporations' operating accounts (via checks, withdrawals, and transfers) to pay their own and their children's living expenses.
The taxpayer had to pay income taxes on the money taken out of the corporation.
