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Hello, My company is a C Corp in Texas. When I bought some property 10 years ago, (200 acres), the Corporation paid for it, so it has been carried on the company books, and depreciated. It had and still has several buildings, one is the office for the company, one is a guest building with entertainment area, etc. Later I built a house on the property and paid for that with personal funds. But I borrowed from the company to do so, so I have a loan to shareholder. Now I wonder if I should put the house on the books and reduce the loan to shareholder. If I do can I stop depreciating everything? I don't want to experience any more capital gain by continuing to depreciate. What are the other tax implications of doing this? Any advice will be greatly appreciated.
Country/State/Province of question: Texas Already Tried: My concern is that since our company is no longer raking in money, I will not have sufficient income to be able to pay down the 1.1 million loan to shareholder. If I put the house on the books, that will reduce the loan to $300,000. I know the company will have to pay capital gains when it sells the property, but wondered if I put the house on at cost, (even though it already has a gain over the last 5 years), can I put it on at cost, and then when we sell the entire property, call part of that gain a gain to me personally, and the rest a gain to the company?
CustomerKeep the asset personal and the loan on the books. I say this because you can more easily get the money out of the corp without double-taxation of officer wages complications. As a general rule, never put real property in a corporation, especially a C-Corp. You could potentially pain large capital gains tax at the corporate level and tax on dividend income (double taxation) at the individual level when you distribute the profits. An LLC is currently the more accepted method to hold real property and have liability protection. Please let me know if you have further questions.Regards,Mark D
Enrolled Agent
MBA, EA, Specializing in Business and Individual Tax Returns and Issues