Seth Breidbart wrote:

- quote -

I think this falls apart the most when you try to sell a corporation
with a $151,000 gain asset for the FMV of the asset. You have to
discount the proceeds from the sale of the corporate stock by the tax
the buyer would have to pay to liquidate the asset and get it out.

Even assuming the corporation was only in the 15% bracket for the entire
gain, when it sells the asset, it will pay $22,650 tax on the asset,
leaving it with cash of $279,350. A buyer might pay that much, and your
guy pays capital gains tax of say another 15% on (279,350 less 100,000
basis =) 179,350, or $26,903. Net is then only $252,447.

Phoebe

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- quote -

Corporate rates are 15% on the first $50K, then 25% on the
next $25K (to $75K), then 34% on the next $25K (up to $100K
now).

And that is if the company isn't classified a Personal
Holding Company (PHC), in which case, add 15% to the above
numbers unless the profits are distributed.

Besides, all of this is really unnecessary. Just hold the
property a little longer.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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- quote -

Try again: if he sells the property personally, he pays 28%
up front. Then he invests the money, and pays 15% capital
gain on the profit later.

Or, he puts the property into a C company, which sells it
(15% up front). It invests the remainder (say, in another
piece of property). That goes up in value, and the C corp
is sold: 15% capital gains on the net, which is less than
the net on the second property.

Example: cost basis $100K, sale price $160K. Second
property doubles in value, ignore property taxes, rent, etc.

(1) Sell, get $160K, pay $16,800, net $143,200.
Later, sell for $286,400, pay $21,480, net $264,920.

(2) Corp sells, gets $160K, pays $9,000, net $151,000.
Later, sell corp for $302,000, pay $22,650, net $279,350.

What I'm not sure of is: (1) Is the C Corp's basis the same
as the stockholder's basis? (2) Is the stockholder's basis
in the C Corp the fair market value of the property
contributed?

(My example assumes both answers are "yes".)

Seth

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- quote -

Let's see.......15%+ corporate tax rate, 15% capital gains
rate, over 30% on that series of transactions (if it isn't
all a sham to begin with). or 28% at regular tax rates.

Or just hold the house another couple of months.......

Or the OP could be confusing "net proceeds" with any gain on
the sale.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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ohnmolinda[at]yahoo.com wrote:

- quote -

[snip]

Seems like a good way to maximize tax paid.

A closely-held C corp. holding real estate as an investment
is in danger of being a personal holding company. These are
discouraged by being taxed at a punitive 39.6% of
undistributed income, on top of regular corporate taxes.

Distributed income, though, is dividends and double-taxed
even with the dividend tax relief.

--
Chris Green

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- quote -

Just sell the corp itself, and pay capital gains tax.

Seth

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<johnmolinda[at]yahoo.com> wrote:

- quote -

And how will you get your money out of the corporation, if
not now or soon, then later? If you distribute it as
dividends, and they qualify as qualifying dividends, you
will pay tax a second time at 15%. This combines to 2% more
than if you just paid the short term capital gain rate.

If you take the money out as salary, you pay ordinary income
taxes PLUS FICA taxes, plus Federal and State Unemployment
taxes, plus likely some level of worker's compensation
coverage on the wages. Sounds like way more than 28%.

And keep in mind that corporations do NOT get the benefit of
the reduced capital gains rate on long term holdings. So if
the corporate investments increase in value sufficiently,
when you cash them in you will pay tax at the regular
corporate rate.

You are likely going to cause more problems for yourself
than you'll solve by doing what you suggest. I'd recommend
against it.

Gene E. Utterback, EA

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johnmolinda[at]yahoo.com wrote:

- quote -

Eventually, you will want to take the money out of the C
corp. and have to pay income tax on the dividend.

--
Frederick E. Jorden http://Tax-Accounting-Payroll.com
7825 Midlothian Tpk - 207 Richmond, VA 23235-5247
EMAIL knowtax[at]bigfoot.com
(804) 320-6210 FAX (804) 320-6211

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<johnmolinda[at]yahoo.com> wrote

- quote -

Well it seems you have the taxable gain confused with your
cash proceeds. What is your gain? Selling price less cost
basis and selling expenses?

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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Is it possible to avoid short term capital gains on real
estate by having the real property be owned by a C
corporation? Here's the situation...I own a residential
house that I want to sell. I have owned it for 6 months. If
I sell it, I will be charged short term cap gains, which are
equal to my ordinary income tax of 28%. If I form a C
corporation and xfer the house into the C corp's name, then
the C corp will be the entity that sells the house. My net
proceeds of $60,000 will only be taxed at the C corp's 1st
tier tax rate of 15%.

I then have the C corp invest the $60k so I don't have to
personally take the $ from the C corp and be taxed again.

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