Re: Tax liability on repair credits?? - Posted by Dave T
Posted by Dave T on February 18, 2002 at 10:54:00:
Separate the two transactions, and pretend they are arms length. If you did not own the company, you would have borrowed the purchase funds from some lender that would expect repayment. If you did not own the property, the company would expect to be paid for rehab services performed.
First, you received money from the company for personal use. Either that money is taken as a loan that should be repaid, or that money is a withdrawal from owner’s equity. Ask your accountant how to treat that money for the best tax outcome, and document it accordingly.
Second, it appears that you hired your company to perform rehab services for which the company was paid from the proceeds at settlement. This money is income to the company for services performed.
One problem I see with claiming that your company performed rehab work at no cost, is that you can not then turn around and add the rehab costs to your basis in the property. Keeping the transaction at arms length overcomes this.
I suspect that the bottom line is that the $10000 for rehab work is income to the company, which you then withdrew as owner’s equity for personal use. Somewhere in all of this, your company should show $10000 as income for services performed, while you have a (tax free perhaps) withdrawal of owner’s equity.
Just my humble opinion. I am not a tax professional and do not pretend to be a corporate accountant. Please consult your accountant for specific details.