C corp NOT separate entity?? - Posted by Jack KY
Posted by Jack KY on July 10, 2003 at 10:11:36:
I have a C corp that I created to manage my rental property and to do rehabs and flips.
I decided to keep a property for rental that was originally purchased in the corporation. I bought it from the corporation, which I thought was as a separate entity.
I had loaned the corporatin the money to purchase and rehab the house. The loan principal plus the interest on the loan was the purchase price of the house. This price was a little below the fair market value.
I applied for a loan (based on MY purchase price) to pull out most of my money for other re purchases. The mortgage broker said that the lender would only lend on the corporation’s purchase price, which was very low given the rehab work needed for the house.
The lender says that “…this would be considered an arm’s length transaction meaning that the corporate veil is not really a separate entity, you would be buying the home from yourself. Which is a big no-no.”
He went on to say, “One of the biggest sources of fraud that has lead to very high foreclosure rates is “flipping”. All new appraisals will have to list a sales history from the property over the past three years. So, it would be known what the last purchase price was, you would have to sign the deed as the president of the corporation and the new owner so it just wouldn’t work.”
Is this guy right? Is buying a property from a corporation that I am president of the same as buying it from myself?