Hi Everyone,
Offsetting the inter-companies loan accounts with journal entries instead of physically transferring the money around.
Mrs. Simpsons and her step son Mr. SouthPark are the beneficiaries of Family Trust A.
Mrs. Simpsons owns 100% share in the corporate trustee of Family Trust A.Family Trust A owns 57.5% shares in Company B.Company B owns 100% shares in Company C.Mr. SouthPark owns 100% shares in Company D.
Family Trust A loans $100,000 to Company C.Company C loans $100,000 to Company D.Company D loans $100,000 to Family Trust A.
Can we offset the loans between the three entities using journal entries instead of physically transferring the $100,000 between the three entities bank accounts?The example journal entry for Family Trust A would beDr Loan from Company D $100,000Cr Loan to Company C $100,000
The three entities have different ownership. The debt forgiven won't be treated as deemed income, right?
Thank you.
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