Quitclaiming To S-Corp
I own a rehab property which I plan on flipping but for tax purposes I want to quitclaim it to my one person s-corp first. Will quitclaiming to my s-corp trigger any kind of tax event as if I was selling the property? Also, do I report this "transaction" on my taxes anywhere? Thanks!
You need to 1099 him from the business that piad him...hopefully you paid him from the same business that will make the money when the houses sell....
You would want to write off the 16K as Capitilized expense for 2005. This defers the "loss" you would take if you claimed it as a "repairs"...which is illegal. You must claim any money put into a property used to get it into "service". Wheather that be repairs done inbetween buying and selling a place, or repairs done when you buy a place, fix then rent.
Hope that helps,
Sam[ Edited by samedwin on Date 01/15/2006 ]
I asked my CPA the same question concerning rehabs I have done.
He said to 1099 the contractor this year, but do not claim it as an expense. It is capitalised into the property you rehabbed, and deducted as Cost of Sales when you sell the properties next year.
[addsig]
2nd post is correct
Actually both samedwin and bargain76 are saying the same thing.
1099 the contractor for the amount you paid him in 2005.
Capitalize your cost by adding that amount to your cost basis in the properties. When you sell the properties, the "Cost of Goods Sold" on your Schedule C will reflect the rehab cost.
Right. Got that. My question was more about handling him in regards to my other contractors for my company (sole proprietorship) that I 1099 each year. Is he included in that roundup or 1099/1096 separately. And do I complete the Schedule C on 2005 taxes even though I have not sold the property?
So if I understand correctly, you are saying I should issue two groups of 1099s with a 1096 summary for each even though the company is a sole proprietorship and essentially the same enitity for tax purposes as me. One group will be all of my company subs and the other group will be my repair person.