> The IRS already has clear rules requiring that certain corporate expenses are treated as taxable individual income if they directly benefit a particular employee or investor.

I replied to GP with the same thought as you, but I think there might be some merit in the "loan" angle.

Lets look at the case that you operate as a consultant/contractor/etc. Your "startup" starts making some very large revenue, and you'd like to use that money to pay rent, go on vacation, pay for surgery, etc.

Any money (say, $amount) the business pays on your behalf (hospital, landlord, etc) is considered your personal income and taxed appropriately.

But, if the books reflect that it was given as a loan, and you are now on the books as a debtor (with the business being your creditor), then that specific $amount isn't taxed as your personal income (loans aren't considered income, as far as I know, because they are a liability).

So, as long as you are in control of the business, the business doesn't need to initiate the "pay back now or we start legal proceedings" process. What instead happens is that this loan amount in the business books just grows and grows (interest accumulates) until the business dies/ends/is sold without ever collecting on it.

As long as the business itself does not have outstanding creditors when it eventually comes to an end, that "loan" can be just written off.

What's the revenue service going to do? Claim that businesses can't write off debt anymore?