Where Do I Post My Question?
Posted on: Fri, 05/02/2008 - 08:13
We’re happy to take your tax questions at the First Class Lounge Forum.
I’ve moved a couple of questions that were in this forum over there just now. So, please make sure you check it out!
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You’re the best tax strategist I’ve found. Quick question no one else has been able to answer: We own a small business (auto service, C-corp) but want to invest for retirement in small multi-family properties.
Can we make the business a passive member of an investment LLC in order to use pre-tax savings in the corporate account for real estate investing? Is there a better way?
Our CPA just always says never to mix up the business in anything else (due to asset protection concerns), but I’ve read your book (Tax Loopholes) and know there are ways to make our business work for us.
First of all, thank you for the kind words!
The C Corp can invest, but to be honest it’s not my favorite way to do it. The problem that occurs is that when/if the investment LLC sells an appreciated asset, the profit will flow through to the owners. That means the C Corp is going to pick up some long term capital gains income. The C Corp doesn’t get a special LT capital gains rate, though, and so it’s all taxed at the ordinary income tax rate.
If you’re trying to get cash out of the C Corp for investing, then I’d suggest loaning it to the LLC. Don’t loan it to yourself, though, or the IRS might try to call them deemed dividends.
If your plan is to reduce the C Corp income, then you might consider a pension plan that you can self-direct (like a Solo 401(k) -if you qualify) This will reduce your tax in the C Corp and give you money for investments.
Writergal, if you could post questions at the FCL portion of the forum, I’ll make sure I catch them. I don’t typically answer questions in this section, but I saw you were a first time poster so wanted to make sure I welcomed you!