Your Question, My Answer... > Credit/Financial Analyst

I have a borrower that loaned money to one of his business. Based on your article, “A revealing conversation with a customer’s tax return” I am able to better understand what interest I can count as cash flow. However, my question is regarding the principal payments received from the company to my borrower. Is there anywhere on the tax return that shows the principal payments made? It does not fit for form 6252 “Installment Sale Income” worksheet since it is not a sale. Where can I find out the principal paid to be used as cash flow.
Thanks! Brody

June 14, 2012 | Unregistered CommenterBrody

First, my apology for not answering this sooner. I simply was not notified that you had posted a question. My fault.
In answer to your question, there is no place on the personal tax return (Form 1040) where the principal payment is recorded. That said, the information may be on the Schedule K-1 issued the shareholder of an S corporation. Look at line 16, Code E of the Form 1120S Schedule K-1. If there's an amount on line 16 with code E, that's the principal paid back to the shareholder during the year. The Schedule K-1 for a partnership (including an LLC taxed as a partnership) does not provide this information. Hope the tardy response helps...

September 21, 2012 | Registered CommenterMichael Jellison