Operating your business as a C corporation, S corporation, or LLC can have its advantages — like limited liability protection. But there are things you have to watch out for. Exhibit #1: The related-party matching rule If you’re not careful this rule will put your business on the cash method for deducting payments to related cash-method taxpayers. The bottom … [Read more...]
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Careful! Selling to a “related party” can kill tax deductions
What’s worse than losing money on a sale? Losing your tax deductions for that loss on sale. That’s right. If you sell property to a “related party,” you may not deduct your loss on sale. What’s more, the loss you can’t deduct no longer belongs to you. It moves to the related party and can turn a bad situation into a holy mess! Want to find out how to avoid costly … [Read more...]
Co-owner buyers need a buy-sell agreement!
Buying a business with co-owners? Then you need to set up a buy-sell agreement. And fast. Why? Because a well drafted agreement can… Transform your business ownership interest into a more liquid asset Prevent unwanted ownership changes Save taxes and avoid hassles with the IRS If you want to find out how buy-sell agreements work and how they can keep you out … [Read more...]
Buying a business? Due diligence is critical
Buying a new business can be extremely risky. That’s why, before you sign on the dotted line, you should conduct an in-depth due diligence review. Whether you’re going to arrange for an asset purchase or an ownership interest purchase, a careful due diligence review can help you avoid exposure to liabilities, known and unknown. Want to avoid after-the-purchase … [Read more...]
Tax-free rental of your home to your S or C
In past issues of the Tax Reduction Letter, I’ve explained how you can rent your personal residence to your S or C corporation for fourteen days or less. Why would you want to do that? Because, as I’ve said, if you handle the transaction properly, you can get a tremendous double tax benefit… Your S corporation deducts the rent it paid you and then flows that lovely … [Read more...]