Hi, I have one owner of a 50/50 LLC has property draws from the LLC of improvements made on his behalf to his personal business property. The draws have created negative equity for the owner and in turn created a capital gain on his personal tax return.

In order to avoid the capital gain I am proposing that the other 50/50 owner, in the tax year after the draw, back date a loan to the LLC in order to cover the negative equity. (Cash for the loan was not made in the prior tax year.) Is there a valid loan?