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Ask Lane Your Own Question
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10499
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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hello, ive sold property in a c corp. i took some of the money

This answer was rated:

hello, ive sold property in a c corp. i took some of the money and put it directly into my s corp(commission/ordinary income). one cpa says its taxable even thoughi have a 280000 carry fwd loss. the other cpa says it hasnt been carried to my personal because i never had an income in the s corp , loan or any liability. he said i had no basis? who is right

Lane :

OK, lets take this one piece at a time

Lane :

By the way GODD MORNING! (if you're on the east coast)

Customer:

gm

Lane :

Because the C-Corp, as you know, is a completely separate entity (and doesn't get the benefir of capital gains taes as individuals do, the sale (the gain from the sale, FOR the C-Corp) is taxed as regualr C-Corp income ... at the corporate tax rates.

Customer:

yes c copr cap will get paid..

Lane :

The tax the first CPA is probably talking about the C-Corp's tax

Lane :

Hang with me a mintue...

Customer:

ok..lil cpomplex

Lane :

Because of the double taxation of C-Corps ... even though it's taxable at the C-Corp level, anything you take out of the C-Corp that's not compensation is a dividend (BOTH ae taxable to you, as an individual)

Lane :

and finally,

Lane :

If you decide to put some of thos (Now, after tax dllars) into the S-Corp, as a capital contribution, that's your business

Lane :

THat money you contributed to the S-Corp DOES become basis in the S-Corp

Lane :

but the taxation comes from it either being comp or a dividend from the C-Corp to you

Lane :

Make sense?

Customer:

sorta..one more question

Lane :

sure

Lane :

Is it the C-Corp that has a carryforward? or you?

Customer:

if there was no basis before this year and had a carry fwd loss of 280k in s corp. i took money as commsission/income. how can one say its taxable and the other doesnt see as taxable

Customer:

s corp carry fwd

Customer:

c corp i paid cap gains on

Lane :

k

Customer:

he said the 280k *s corp losses wont be caried to personal cause i never had an income there. so the loss stays with s corp

Lane :

again, just remember that the C-Corp is NOT you ... you have ownership (can pay you dividends AFTER the C-Corp has paid it's tax) and you may also be an employee (where you take salary or comissions from the C-Corp) but both those things are taxable to you as an individual .... Regarding the S-Corp, there's not real separation YOU ARE the S-Corp (S-Corps don't pay taxes)

Lane :

That's right you can carry forward the S-Corp losses against future income, but that and whatever happens to the C-Corps taxes are two different issues

Customer:

so the s corp doesnt have to pay taxes if there s a loss?

Customer:

ive never had an income in there or a loan etc..

Lane :

S-Corps don't pay taxes .. the income or loss is distributed to youi and a K-1 ... the SHAREHOLDERS pay or get the business loss on their PERSONAL tax return .... S-Corps, partnership[s and sole proprietorships are all passthroughs ... only C-Corps and IRrevocable trusts pay their own taxes (at corporation and trust rates, respectively)

Lane :

OU do the 1120 S- (S-corp tax return) but that's just to arrive at what is sent to you onr your K-1 ... S-Corps are pass-throughs

Customer:

i understand the pass thru..the 1120s on pg 4 say ive had carry fwd loss, but also say i received income of 200k so istill have 80k loos going fwd

Lane :

Yep

Customer:

therefore i didnt have to pay taxes on that $$..again cuz no income evr in s corrp , loan etcc..

Lane :

right

Lane :

That's right you have no basis in the S0Corp with which to take then loss

Lane :

The passthrough loss in an S-Corp only memefits you to the extent of your BASIS IN that s-corp

Customer:

basis in 2 yr old terms mean?

Lane :

Your investment in the S-Corp (can be a capital contribution or a shareholder loan TO the S-Corp

Customer:

ohh ok..gotcha..

Customer:

thank you

Lane and other Tax Specialists are ready to help you

Thanks Dan.

Let me know if I can help further.

Lane