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Transferring/loaning wealth from Proprietorship to Corporation.

Due to extreme Social Security Taxes, I've incorporated to Sub-chapter S, effective July 1, 2017. I have 3 different companies in which I converted to "Class" or "Divisions" of the corporation. Now I am moving assets into the corporation... but find that the asset value is more than the depreciated (book) values... Land/buildings that is appraised for $3 mil, but has loan to value of about 11%. Equipment (DOT trucks/trailer/etc) valued at about $1 mil, but debt free. Due to Fleet policy, was required to re-title all vehicles to the Corporation and show as accesses ...

Do I bring this extra asset value over as an interest free loan? Like let this Corporation hold the (sweat equity) as a cash value loan? In which one can receive a payment if one needs to draw down investment funds that has already been taxed?

And the crazy thought is does the depreciation start all over again on the tangle values of today. because to assume this existing property loans, had to re title the property/buildings as a sell to the Corporation?

Please advise, have no desire for a Tax man.

Answers

Anonymous
(CFO) |

It will really depends on the nature of the transaction. Buy-out? Merger? Who advised you? Who drafted the legal documents?

"...have no desire for a Tax man"...... hate to break it to you but you may not desire for one, but you NEED one....and if this is a DIY transaction, maybe a lawyer too.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I don't quite understand your opening statement "Due to extreme Social Security Taxes..." as you'll end of paying essentially the same SSN taxes as a C-Corp, a Sub-S entity or an LLC.

You may save a bit if you pay yourself dividends, but depending on how much, you may invite an IRS audit.

I concur with the previous answer - hire a good tax accountant/lawyer and a corporate lawyer. You may have other taxable events based on how you move the assets.

Spend the money now, or pay the government more later...

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