its phantom.   

just to generate tax liability to keep irs happy that it’s a legit loan. correct?



if you then deducted it…wouldnt that be double secret probation?

Yeah, you’re right - except that it has an interest factor in it as well so as to legitimize it ever further as a loan.  For example, say your monthly principal payment on the loan is $5,000.  Your interest may be 3%, therefore resulting in a monthly payment of $5,150.  Your firm would then make a monthly bonus payment to you in the same amount, $5,150 - which you would use to pay monthly amount (so it is a wash every month and you get to pay income taxes on the amount).  So since you are paying income tax on the full amount, wouldn’t the interest portion be deductible, say as investment expense?  Especially if you used the loan bonus to purchase investments?  

A link in case anyone one else here was wondering the same thing…

http://www.taxalmanac.org/index.php/Discussion:Imputed_Interest_Expense_Deductibility