A partnership Loan is a loan made by the partnership to a partner on the day that the partnership pays the excess of the Withheld Amount over the Distributable Amount to a taxable authority.
If the firm fails, the loan is recognized as business debt and must be repaid before earnings are distributed to the partners. Sometimes a company will receive a loan from a partner and deduct the interest as a business expenditure, providing another person an interest-free loan.
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