Can I Use my Coperation now or do I have to wait
My S-Coperation was formed after I got the investment Property
I stand to make 50k off of this investment. Can I use my coperation to sell this property and avoid capital gain taxes or do I have to sale the property without using my corp because I formed it after I bought the property.
Quote: My S-Coperation was formed after I got the investment Property
I stand to make 50k off of this investment. Can I use my coperation to sell this property and avoid capital gain taxes or do I have to sale the property without using my corp because I formed it after I bought the property.
Richard,
Profits are always taxable regardless of the business entity actually paying the tax. Since an S-Corporation is a pass through entity, your corporate income is taxed at the same rates as you would be if you earned the income personally.
If the tax consequences on the sale of the property are the only issue, it is moot whether the property is owned by you or your corporation.[ Edited by DaveT on Date 01/12/2003 ]
Richard,
I'm interested to see an answer to this too. After buying 3 props, I formed a Limited Liability Company. I'm not selling yet, but I'd like to move them into the company. The "company" has already purchased another one, but the guy who sold to me, said that even though the LLC purchased it....it probably wouldn't protect me from liability. My wife and I are directors/partners in the company, and, my wife and I purchased the original props in our names. He said, a court would probably just find the two of us liable if anything were to happen.
Folks - some insight on this?
Thanks!
Hey Daja
Yes, having an LCC doesn’t guarantee limited liability from your actions. The court looks at your “intent”. I myself started a closed corporation, and because I am the only person in the corporation, the corporation could be regarded, not as a separate entity on its own, but simply as an extension of myself.
Fortunately this is not for all cases. You will only be kept liable if your decisions show a deliberate malicious intent.
Run this by some other people more “in the know”, but that’s how I understand the situation.
Rudolf
Richard,
How long have you had this property? If you have had it for over 24 months you can do a 1031 exhange. But chances are you haven't owned it that long.
You can change title of the property into the corporation. Although that may not cover you for capital Gains.
What you really need is a tax advisor. Do you have one for you Corp? If you don't have to pay the capital gains than a good tax attorney would know how to prevent that 40% loss. Or they would know how to diminish the loss.
Not olny will your tax advisor tell you what you have to do. They will be able to do if for you if you need them to.
Good Luck,
Dan
Quote:How long have you had this property? If you have had it for over 24 months you can do a 1031 exhange. Dan, Dan, Dan...
There is nothing in the tax code that requires a 24-month holding period before property purchased for investment can be used as the relinquished property in a 1031 exchange.
Perhaps you are thinking about the rule permitting use of the section 121 capital gains exclusion only once in a 24 month period.
Quote:
After buying 3 props, I formed a Limited Liability Company. The "company" has already purchased another one, but the guy who sold to me, said that even though the LLC purchased it....it probably wouldn't protect me from liability. My wife and I are directors/partners in the company, and, my wife and I purchased the original props in our names. He said, a court would probably just find the two of us liable if anything were to happen.
daja,
There is no absolute protection against a lawsuit. Anyone can be sued over anything. Having a LLC does not mean your LLC is immune from a lawsuit. Anyone suing your LLC will also name you as well. Assuming there was no gross misconduct or malicious intent on your part, you just petition the court to dismiss you personally from the suit.
We form business entities to shield our PERSONAL assets from liability in the event of a lawsuit arising out of our business activities. The LLC limits liability exposure to the extent of the assets owned by the LLC.
Now, on the other hand, suppose your LLC is established as a limited partnership and either you or your wife is the general partner. In this case, personal liability does attach to the general partner, but not to the limited partner. If you are the general partner, if you own nothing (or very little) in your own name, and you limit your partnership interest to only 1%, you are in a pretty secure postion.[ Edited by DaveT on Date 01/12/2003 ]