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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11834
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Dear Pearl, and I have a C-Corp for imports and exports of

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Dear Pearl, I am Brazilian and I have a C-Corp for imports and exports of goods in Florida. During the last 8 years, the corp accumulated 100k in profits. Can I use this accumulated earnings (cash in the account) to buy a real estate property as a rental investment under the company name? My current accountant told me I cannot buy a house for rental because it is different from the original company core activity. he says I must tranfer the money to my personal account, pay around 20% personal income tax, form an LLC to send the money. What can you recommend?

Hi. ... My name's Lane ... I can help here.

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I have a Law degree with concentration in Tax , Estate & Corporate Law, … an MBA, with specialization in finance … a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

Please bear with me a moment while I prepare your response

I completely disagree.

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Companies can have different services, product lines, and streams of income.

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One of the reasons TO use the C-Corp (where, normally, income can be taxed twice when paid out as dividends after the corporation has paid corporate taxes at corporate rates) is to have the C-Corp make it's own investments.

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I would ask this "accountant" on what statute or case law this position is based.

Customer: replied 7 months ago.
you are telling that my operation is correct. BTW, the property is in Atlanta,GA. So please, the rental income profits will be taxed in the same manner as the profits from product sales? Do I have to include a new company activity in the company object and have more than one activity? When I sell the house, the capital gain is going to be paid over the difference between purchase and selling price or over the total price (the house becomes a product in the inventory)?
Customer: replied 7 months ago.
I need the written answer to have proofs against my accountant. Anyway, you can call me tomorrow, not now. best regards.

Forming a second LLC is NOT necessary. The C-Corp can have rental property.

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You will pay tax on the money you pull from the C-Corp if you do so (one of the reasons I don't recommend C-Corps very often; the double taxation that comes with C-Corps).

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C-Corporation is the the only entity where it pays taxes on it's profits at corporate rates, then if that profit is distributed the owner gets a 1099-DIV and pays tax a second time.

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LLC's, partnerships, S-Corps ALL (even trusts can) pass out the income to be taxed at the personal level.

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The reason TO do this, now that you DO have this Corporation is to manage risk, and simplify bookkeeping and taxes.

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in a separate entity, no one can come after the C-Corps assets or your assets for things related to that separate entity (lawsuits, creditors, etc).

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And if your corporation is already at a high enough tax bracket (depending on your own tax bracket) the tax may be lower on the income by purchasing the property through a pass-through entity, and being able to reduce the income by the rental's expenses (mortgage interest, depreciation, etc.)

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But to say that your corporation can't own the rental property is not true. Many do. It can be easier for a C-corp to qualify for bank financing, as an example)

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And some do it becasue OF the available cash and no taxation, when the C-Corp already exists. Report the rental activity on form 1120 page 1. Report gross rents received on line 6. Deduct expenses such as repairs, interest, depreciation, taxes etc. on lines 12-26.

Customer: replied 7 months ago.
thank you. I will get back to you on Monday or Tuesday.

Sounds good. Please understand that I will not be compensated until you rate.

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Ad the phone consult will be additional.

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