Discussion:Transferring real estate from personal ownership/sch e pg 1 to scorp
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Discussion Forum Index --> Basic Tax Questions --> Transferring real estate from personal ownership/sch e pg 1 to scorp
Discussion Forum Index --> Tax Questions --> Transferring real estate from personal ownership/sch e pg 1 to scorp
| 28 March 2009 | |
| Can someone enlighten me as to problems/ things to look out for if one of my clients has done this. He used to own two 3 family houses personally and reporting them on pg 1 of his sch E (MFJ with wife). He had a lawyer draw up papers to transfer them into 2 separate s-corps (newly created scorps whose only holding/purpose is this real estate) which he will be 100% shareholder of in each.
Are there immediate tax implications to this to the s-corps (or to him personally). I have limited knowledge and am looking for some experienced guidance . thanks | |
Rgtaxservice (talk|edits) said: | 28 March 2009 |
| JR will probably weigh in on the finer points of real estate into a S Corp.
But the main thing that comes to my mind is why would you ever take passive income that the taxpayer had free access to and convert that income to something that some part would be of would be subject to SE tax. Your client will now have some sort of payroll...subject to FICA & MED withholding. Maybe not for all of the income, but that part that could be deemed a reasonable salary. I think your client made a huge mistake. | |
Laketahoecpa (talk|edits) said: | 29 March 2009 |
| If the properties are mortgaged and the mortgage is higher than adjusted basis of the property, then he will have gain upon transfer to the S corp to the extent of the excess liabilities.
Another issue - his losses may be limited now or in the future due to issues with his basis in S corp. | |
| 29 March 2009 | |
| He would not have to take wages if the only income in the S corp is passive rental income. | |
