Personal Monies into a Business
I constantly had to utilize my personal monies to pay bills on a business I owned (I sold it June 2018) this included lease and utilities, buy product, etc. Can I possibly claim any of these funds on my personal taxes? I was sole owner, it was a C Corp, and I worked the business as well. When we didn’t make enough in a month revenue, I had to pay these items out of pocket. My business never reported a plus in the 4 years it was opened – we never owed taxes. Thank you if you can help me and answer this question as I have been reading and reading and asking but no one can answer it.
These things happen, especially when a business is winding down and being sold to a new owner. Here’s how this situation works. Since this was a corporation, all of those out-of-pocket expenses are considered capital in nature. Which means these amounts are considered as if they are additional capital or equity contributions you made into the corporation. These amounts should be itemized, and then added to your cost basis in the corporation’s stock. You recover those expenses on your Schedule D, showing what you sold the corporation for, minus your cost basis in the corporation stock, and the difference is your capital gain or loss on the corporation. Thus these out of pockets function to reduce your capital gains from selling the business.
Talk to an experienced CPA or Enrolled Agent. They can help you document your out-of-pocket expenses and claim them on your tax return.
Hope this helps!
Staff writer for FitSmallBusiness.com