Posted by JHyre in Ohio on March 10, 2000 at 06:47:18:
Dave’s right. He also contributes a lot to this site, even if I disagree with him on certain issues. You do not contribute. Get a quarter, buy a clue.
John Hyre
Jim Piper - “How do I…?” - Posted by Brian (IN)
Posted by Brian (IN) on March 09, 2000 at 13:45:16:
Jim,
I have read your help to many people on this board and greatly respect the time you take and your knowledge.
I have a property I have title to in my name and would like to quit claim it to my C corporation and sell it. This is to take advantage of the tax rate for my C corp and being able to spend the profit on corp. perks prior to taxation. I have held it less than 12 months. My question is at what price do I transfer it from me to my corporation. I purchased it using conventional financing with a 90%LTV loan. I have about $11,600 of my personal money in it for downpayment and closing costs.
Purchase price was $81,000
Fair market value is $105,000
Closing costs approximately $3,000
Fix up costs $500
What is the best scenario to transfer the property to my c-corp?
Thanks for your help,
Brian Gatewood
Re: Jim Piper - “How do I…?” - Posted by JPiper
Posted by JPiper on March 09, 2000 at 19:19:05:
To be honest with you, if I were contemplating this type of transaction I would call my CPA first. So that you know, there are extensive rules regarding this type of transaction. Transactions between a corporation where you are the primary shareholder and yourself have the potential to be held up to scrutiny by the IRS. It?s not an arms length transaction. My concern would be that if you transfer to the corporation, then immediately sell?.and the effect of that is to lower your taxes?.that the IRS might have a problem. But as I said, talk to your CPA first?.I?m not one.
One thing to think about is that if you sold the property in your corporation, although you can take certain expenses pre-tax, any remaining funds become a problem. Here?s what I mean: if the funds are left in the corporation they are subject to a 15% rate under $50K. But if you need to get the money out personally then you would be subject to double taxation first with the corporate tax, and next with personal tax as either salary or dividend income. Even if you distribute excess profits in the same year, dividends are not deductions at the corporate level. Salary would be?..but then it is going to be taxed at your personal rate?they very thing you evidently are trying to avoid.
Without knowing the rest of the circumstances, I would be tempted to try to hold the property for the 12 months?.then sell?thus qualifying you for a long term capital gain perhaps (unless this is dealer property). At that point you could consider loaning the corporation the money (talk to your CPA first)?.and then if you want to distribute money back to yourself you could do it in the form of a loan repayment?.a non-taxable event.
Bottom line here is that the best suggestion was in the the first paragraph?.talk to your CPA first before effecting a transfer?.see what complications there might be with your scenario. Sorry I?m not of more help.
JPiper
Go with the “S” Corporation! - Posted by Harry W
Posted by Harry W on March 09, 2000 at 13:53:50:
If anything I would quit claim it and place it in my “S Corporation” if you are selling. I’m sure Piper will agree with this. Brian read up on the corporations and you will see what I mean here
Harry W
How can you… - Posted by David Alexander
Posted by David Alexander on March 09, 2000 at 14:10:35:
say he needs to use an S corp when you dont know his plan. S corps filter straight through and there are more right offs for a C Corp. He didnt say he was holding the property, he said he was selling it. With out knowing how he is going to sell, for cash, owner financing and his plans, there is no way to reccommend which kind of Corp or entity.
David Alexander
Shut up! Would ja already - Posted by Harry W
Posted by Harry W on March 10, 2000 at 05:13:50:
Mind you own Ps and Qs David. I know whats going on here! Go bother someone else. You are a pest!
Bye
Harry
Dave’s right… - Posted by DanM(OR)
Posted by DanM(OR) on March 10, 2000 at 10:58:53:
he really needs to decide where he is, where he is going, and how he is going to get there.
Piper is right on to. He should do all the above while talking to his CPA. A good one mind you, that understands the complexity of the deals you are going to do.
Good Luck!
Dan Matejsek
P.S. I just had this conversation with mine two days ago.
Re: Shut up! Would ja already - Posted by David Alexander
Posted by David Alexander on March 10, 2000 at 09:28:36:
Harry, I would have sent this to you privately but since you post your email address… Well. I wasnt trying to offend you simply stating that it’s a bigger issue than just one deal and his whole plan needs to be takin into consideration before trying to decide what kind of enitity structure.
David Alexander