Best way to get personal cash into an LLC for a Syndication deal?

[Andrew Angell]

TL;DR - What's the best way to put personal cash into an LLC for a real estate syndication deal that will pay monthly cashflow? Also, if I borrow from my life insurance policy can I deduct the interest paid back to that loan without claiming that interest as income on my personal return?

General Situation

I have a Series LLC that holds Real Estate.

I have some personal cash (distributions from other business) that I'm going to commit to a Syndication deal, and I'd like to do this through my LLC.

The syndication deal is for income and will pay 10% with monthly payments.

Should I do a contribution of personal cash into the LLC, and then take those payments back out as distributions?

Or should I do an actual loan from myself personally to the LLC with a signed agreement / schedule, and pay it back to myself with interest?

Tax Implications?

If the LLC is paying interest on a loan, that would be deductible. However, that interest would be coming to me personally, which would have to be claimed, so it would end up on my 1040 anyway.

Is that right, wrong, or is there some other reason doing the loan would be better?

Potential Special Circumstances..??

I have a life insurance policy with cash value that will cover this deal. I could take a policy loan and borrow the cash from the life insurance company for the deal.

I'm getting mixed feedback on whether this would allow me to deduct the interest on the loan without claiming it on the personal side.

Some are telling me that the insurance loan would be to us personally, and then we'd have to make that loan personally to the LLC. As such, the interest would be paid to us and would have to be claimed.

Others are telling me that if I simply have the insurance company deposit the cash directly into the LLC bank account for the loan, then I treat it as such, then the interest paid is deductible without claiming it on my personal side, because the interest was paid to the insurance company...not to me.

Any information on this would be greatly appreciated. Thanks!

[Jim Pfeifer]

I am not a tax advisor of a financial advisor so please understand I am not giving any advice or recommendations!

I use the cash value from my life insurance policies to invest in syndications by taking out loans on my policies.  The policies continue to perform because the insurance company loans me the cash and uses my policy cash value as collateral.  When I invest the proceeds of the loan in a syndication, I end up with two returns from the same dollar.  The interest on the loan is simple interest and I take all of the distributions from the syndication investment and pay off the interest and pay down the principal.  My accountant tells me that the interest payments I make are deductible because the loan is a business expense. You don't have to count the interest as income because it isn't income to you - it's paid to the insurance company.  I also benefit because most of my syndications to cost segregation and bonus depreciation.  

In the end, you are using lazy money to invest in real estate, making two returns on one dollar, getting tax benefits so you are likely not paying tax on your distributions or gains and investing in real assets that produce cash flow.  Seems pretty good to me!