Probably not an Issue - Posted by JHyre in Ohio
Posted by JHyre in Ohio on March 27, 1999 at 15:54:43:
The following is a general commentary on PHC rules. Because those rules (like much else in Internal Revenue Code) are complicated and poorly written ,this primer may or may not apply to your indiviudal circumstances. So you still need to check with a tax advisor, preferably one with a clue. With that said:
To be a PHC and subject to “forced distribution” of dividends at max rate, corp must meet two tests:
60% of the income must be passive (rents, interest, dividends, etc.). The last sentence is a GROSS simplification, but is essentially correct.
The stock must be 50% held by or for 5 or fewer individuals.
BOTH tests must be met for PHC status to exist. The first (passive income) test is almost certainly not met. That is, you probably plan to use an LLC/S-corp for passive investments and a C-corp for active flips, so no PHC problem (subject to ALL your facts & circumstances!). If you were going to put lots & lots of passive things in a C-Corp, go stand in the corner for an hour and then write “I will not stack C-corps with passive investments” 1,000 times.
VUL’s are useful for high-bracket people (taxwise, that is). The commissions are WAY high, so they are less beneficial for most of us low to medium income mortals.