Why do you presume someone is a tax cheat just because they use a corporation to buy/hold/rent back their home? Are you aware of a particular tax code provision that says this is not allowed?
It is perfectly legal to own rental property, and also perfectly legal to convert a residence into a rental property (there are rules about establishing your cost basis as the lesser of acquisition cost and FMV at the time of conversion, but assuming you follow the rules, there is no “cheating.”
The only difference is that the shareholder of the corporation is also the renter. As long as they are paying themselves Fair Market Value rent, what’s the difference???
Heck, if the corporation makes money, it has to pay taxes. Furthermore, the corporation cannot take advantage of the tax-free gain ($250K or $500K), and there are annual expenses involved (separate tax return, fees to establish and maintain the corporation).
So, it would only make sense to do in certain situations, namely, where the ownership expenses exceed FMV rent, and if values go down between establishing as a rental and eventual sale.[/quote]
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Why do you presume someone is a tax cheat just because they use a corporation to buy/hold/rent back their home? Are you aware of a particular tax code provision that says this is not allowed?
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PG…From experience…. Just kidding. I think you misunderstood me. I didn’t saying folks that use a corporation are all tax cheats or for that matter a home purchased under a corp…. What I was suggesting is if IRS wants to step up collecting money from tax cheats, it can probably find more “aggressive accounting” when it comes to folks playing with variables on a corp tax return or a small business return for that matter and than chase after folk’s mortgage interest deductions… Things such as fake losses or fake business expenses or private property misappropriated as company expenses or something as simple as small businesses shutting off registers during the day and/or giving out “cash only” deals.. Hell, just go after most of the small businesses in Monterey Park… Everyone knows that if they owners actually earned what they reported, no way in hell they would be able to come up with a full cash buy on homes in Diamond Bar or Hacienda Heights….I can guarantee a lot of those cash only places are doing it not just because they don’t want to pay the fees for accepting a credit card.
