| How To Take Up To $500,000 Out of Your Corporation TAX FREE! |
Here's a LEGAL LOOPHOLE that will allow you to take up to a
half million dollars out of your small business corporation
TAX FREE!
by Alex Goumakos, CPA
Here's a great way to take up to $500,000 out of your
corporation absolutely and legitimately --- TAX FREE.
Let's assume that you've outgrown your principle residence
and want to move into another one. Instead of following the
normal routine of putting your house up for sale and waiting
for a buyer, why not consider selling your house to your
corporation?
Selling your personal residence to your corporation is one
of the smartest tax decisions you can make. Not only is it
an excellent way to pull money out of your corporation TAX
FREE, but it's also a great way to give yourself a
tax-sheltered investment. Here's what I mean:
If you want to sell your personal residence and you own
either a C or an S corporation, selling your home to the
corporation gives you the following tax benefits:
You can pull money out of your corporation TAX FREE! - This
is because the gain on the sale of a principle residence can
be excluded if the gain is $250,000 or less ($500,000 for
married couples filing jointly) as long as you meet certain
requirements.
Your company can rent out the house and generate BIGGER tax
deductions - Since you sold your personal residence to the
business, it now has a stepped-up basis (higher value) and
can generate larger depreciation deductions than if you
rented out the house yourself. If your corporation is an S
corporation, these deductions can be used to offset your
other income.
We just used this strategy much to the delight of one of my
clients. Here are the facts and circumstances of this
particular case:
My clients, Eric and his wife (not their real names and
situation used by permission), are the 100% shareholders of
a small and very successful printing company. The printing
company is a Subchapter S corporation. Eric and his wife are
expecting their fourth child in less than six months. They
have both decided that they will need a bigger home. Instead
of putting their current home up for sale, Eric and his wife
have decided to keep it for investment purposes.
However, instead of keeping the home personally, they have
sold it to the their corporation for its fair market value
of $285,000. Since the cost of the home plus improvements is
$175,000, Eric and his wife have a gain on the sale of their
residence of approximately $110,000.
Since married couples filing jointly can exclude up to
$500,000 of gain on the sale of a principle residence
(subject to certain restrictions), Eric and his wife will
NOT pay any federal tax whatsoever on the transaction.
In addition, the corporation now has an investment worth
$285,000 that it will depreciate as a rental property. If,
at the end of the year, the expenses are greater than the
rental income, the owners of the S corporation (Eric and his
wife) will have a rental loss that they can use to offset
their other income.
Can you see the beauty in using this tax strategy?
In addition, if your corporation generates adequate cash,
you can structure your own financing. Of course, everything
has to be documented and executed as if you were selling it
to a stranger. In other words, you can't sell your $200,000
home for $700,000 (unless that's the market value).
This strategy works even better when you have a C
corporation. You can avoid the double taxation trap
completely. Also, you can even use this tactic when you
don't completely own your corporation. However, you'll have
to consider the risks of losing control of the home to a
fellow shareholder.
Nevertheless, if you're looking for a way to pull out money
from your small business corporation TAX FREE, consider
using this strategy. As always, be sure to consult with your
professional tax advisor before considering this or any
other tax or investment strategy
RESOURCE BOX:
Alex Goumakos, CPA has over 20 years of experience helping
entrepreneurs start and grow successful businesses. If
you're ready to earn more money, pay less tax and generate
more wealth, visit his website for FREE tips, strategies and
tools to help turn your goals into results.
http://www.goldminetactics.com
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