Thank you for asking your question on Just Answer. In order to address your question I would need the following information-
Is the S Corporation into construction business? Why does he want to build a house and sell it personally?
What is your specific question in this regard?
As an officer of the S Corp, the client gets salary from the S Corp. As far as S corp is concerned the entity and the officer are separate person and hence the S Corp can sell the house to the officer. The sale would be recorded in the same manner as a sale to any other person.
Let me know if you have any question.
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.
I had referred to the same situation that you described above. The officer is a customer of the S Corp and he got the house built by the S Corp for his personal investment purposes.
Since S Corp is a separate entity, the stockholder can be a customer of the entity. However this would be considered a related party transaction and the issues may arise in a situation where the transaction takes place a below fair market value.
It is similar to having a single member LLC to own the property and than sell it to the S Corp in which the single member is the sole stockholder. These kind of arrangement are quite frequent in construction business.
I would suggest you to look into related party transactions.
Please note that a S Corporation is a separate entity and hence the transaction is between an entity and stockholder. It is not a sole propreitor entity where you cannot buy or sell to yourself.
Even if you are a 50% stockholder of a C Corp- eg. MSFT- you can buy the software from the corp ....only concern would be that the transaction takes place at arms length.
If the shareholder received the construction loan and gave that amount to the S Corp as payment towards construction than the S Corp can report this amount as income and all the related expenses as expense on income statement.
Once again just as the S Corp shareholder can be an employee of the the S Corp, he can also be a client.
I will try to find some regulations and post it for your reference.