Timing of Interest Deduction

[CTipper]

At first I thought this was obvious, but the more I think about it the less I'm sure.

A C Corp is sponsoring a new leveraged ESOP Plan with a December year end plan. Payments are on an annual basis. The loan is taken out at the end of October -- 2 months before the end of the first plan year. This makes the first payment due during the second year.

How much of the interest from that first payment is allocated towards that first plan year?

Thanks

Christopher

[CTipper]

It just got more interesting.

Can the 100% C Corp owner also be the "bank" where the money is coming from?

[A Shot in the Dark]

Self Financing is permissible so long as rules are followed.

I presume there is some form of promissory note, loan security agreement, etc. that outlines terms of the loan.

Interest is deductible for the year in which the interest is paid.