Buy from our Corp to sell on installment - Posted by Lloyd Cook, Los Angeles

import · April 21, 2018, 1:30pm

Posted by Lloyd Cook, Los Angeles on April 09, 2002 at 09:15:55:

The co. is a C-Corp. We formed it 4 years ago for flipping houses, to be a management co. so the rents could be in the Co. name, not ours. And so we could have the Co. provide us benefits, trips, etc. Buying this amount of vacant land was mostly a mistake I am now trying to correct. Typical lot was bought at 3k and we are selling at 40k. we never did flip any houses so the Co. has shown losses for the first 3 years. It can sell two without any problem or taxes. The Co. has borrowed about 100k from its officers to buy the land and operate during this 3 y ears. My thoughts were to have the Co. sell the land to us at it?s cost to lower it?s debt.

import · April 21, 2018, 6:03pm

Posted by Lloyd Cook, Los Angeles on April 07, 2002 at 21:38:39:

My partner and I bought 12 vacant land parcels at various tax sales in our Corporation?s name so we could sell it at a profit to give the corp. money to operate and afford various business things for us. We sold two of them with a land contract at 5% down, balance paid over 15 years at 9.5% interest. The idea was to create various streams of cash flow for many years. The problem is that the Corp. must show all the profit in the year the land was sold, paying income tax on money we did not receive. If the land was in our personal names, we could show the sales as an installment and pay tax on only the moneys received each year.
My question is this:
If we have the Corp. sell us some of the parcels and we then personally sell the land on installment sales, would this flag the IRS to a non-arms length transaction? The problem is we both own the Corp. we sell to ourselves so we can sell and show the income as an installment sale.

import · April 21, 2018, 6:03pm

Re: Buy from our Corp to sell on installment - Posted by JHyre in Ohio

Posted by JHyre in Ohio on April 09, 2002 at 06:43:53:

Why is the land able to be sold on installment method if in your name, but not in corporate name? Granted, a sale that generates interest for the corporation could give rise to “personal holding company” issues- very bad ju-ju. Is this a C-corp, and if so, why are you using it to sell land?

If the corp sells you the property at a loss, the loss is disallowed or deferred. If it sells to you at a gain, the sale can have a true FMV imputed to it, though penalties do not usually apply unless your valuation is off by 200% or more.

John Hyre