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O/T Borrowing money from your self

3

37chief

Well-known Member
Location
California
This started when Mom left my brother and me 4 acres. So I go to the city and they tell me I need to cerate a minor sub division to get a deed for each half, with 1/2 acre lots. This included a lot of improvements required by the city. If I borrow money from a bank to make the improvements, I will pay them interest. How can I use some of my own money, and pay myself interest. When the lots are established I will sell one, and pay everything off, including my self. Any one smarter than I am on this? Stan
 
Credit union I belong to put said amount in your savings.. Borrow from credit union leave savings alone.. they pay you interest on savings So in reality you are paying yourself with, even though shown a different borrowing interest the lesser percentage works out on paper.
 
You could form an LLC real easy with you as the manager. Then you loan the LLC the money and the LLC pays you interest. Of course there is no tax advantage because you pay tax on the interest earned. Plus now you have to do a business tax return and a K1 for yourself. All your LLC expenses can be applied to the individual lots and as you sell them off, you get to deduct that percent from you income. The LLC might give you some protection but it can be a lot of paper work for what your trying to do. This is what I did when I bought some land and divided it into lots. I had 2 other partners to work with so it was the most practical way for us to do it.
 
If you and your brother inherited the property, is there any reason why you and he can"t split it and each go your separate ways? Develop your half if you want, pay for mandated improvements with your money? Then sell when it is to your advantage? What is wrong with paying interest to a bank? It is a business deduction on your taxes, just like any other legitimate business expense. Paying yourself interest? Then that interest income offsets your interest expense deduction=a wash.
 
I will agree that it might be advantageous to form an LLC- Limited Liability Company. Good way to keep it separate from personal money. LIA-FREAKING-BILITY is the key issue! Keep the home bucks (survival bucks) secure-
 
I don't really understand what you are trying to do. If you use your own money to do the improvements and then resale the ground you will get to deduct the improvements cost from any profit. The profit left will be counted as a capitol gain which is taxed at a lower rate than interest income. Capitol gains don't count against SS either. Just like interest income. So I don't get what you are trying to do.
 
What is it you're really trying to do? Declare the interest as a tax deduction? That doesn't really work because you still have to declare the interest as income, so it's a zero net-sum game.
 
No wonder there is some much financial turmoil in the World when individuals think they need to to
'borrow' money form themselves rather than just say they're paying cash.
 
Why does the city dictate to you how to get a deed for the property? Didn't you get that from your Mother?
 
I see no way to get a tax advantage if that is the basis to your question. I borrow money from myself all the time and just put it back when I can. I keep cash accounts for that purpose. Better than borrowing and paying interest even if you can deduct it.
 
(quoted from post at 07:24:14 01/25/12) Why does the city dictate to you how to get a deed for the property? Didn't you get that from your Mother?
Click to expand...

One property, two brothers.

I expect they're trying to split it down the middle, each getting a half.
 
As long as you have this property as a company ,theres no reason you couldnt loan the money to the company anytime.Bro would be liable for half though if it were a partnership.Im not really sure either what you are trying to do,but if i were your brother , (not saying anything stinks in denmark here) , i would think seriously about this.Sounds like he may be getting how shall we say phased out? One thing you better be aware of ,if your developing this property,and its within city limits,most likely you will build roads,utilities,etc to city codes,and then DONATE them to the city before you get service.Know exactly where you stand,have it everything in writing,FROM the city lawyer,and signed by all its council members ,BEFORE you dig one spade full of dirt!!!I OWN property surveyed into lots,with roads etc that the fellow i bought it from didnt know this,he lost money big time!!!!
 
Simple if you have a 401K plan that allows you to borrow from it. Not only can you pay yourself the interest but you can deduct it as a business expense. Unlike the real wealthy that can choose from many useful loopholes, this has been the only time I've been able to "stick it" to the IRS.
 
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