Transferring assets to a C-Corp


B

Brad A

I am the sole owner/shareholder of a California C-Corp that
is now inactive but which is current with respect to state &
federal filings. It has a sizeable tax loss carry-over owing
to the dot-com bust.

Is it possible to transfer & what are the tax implications
of transferring real estate currently in my name (eg. a
vacant lot) for subsequent sale by the corp ?

I'm looking for some way to make use of my already declared
tax losses.

TIA,
-brad a.
 
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S

Stuart O. Bronstein

I am the sole owner/shareholder of a California C-Corp that
is now inactive but which is current with respect to state &
federal filings. It has a sizeable tax loss carry-over owing
to the dot-com bust.

Is it possible to transfer & what are the tax implications
of transferring real estate currently in my name (eg. a
vacant lot) for subsequent sale by the corp ?

I'm looking for some way to make use of my already declared
tax losses.
You can make the transfer. But check with your CPA to see
if it will actually help.

Section 351 of the Internal Revenue Code says,

"No gain or loss shall be recognized if property is
transferred to a corporation by one or more persons solely
in exchange for stock in such corporation and immediately
after the exchange such person or persons are in control (as
defined in section 368(c)) of the corporation."

Section 368(c) says,

"For purposes of part I (other than section 304), part II,
this part, and part V, the term 'control' means the
ownership of stock possessing at least 80 percent of the
total combined voting power of all classes of stock entitled
to vote and at least 80 percent of the total number of
shares of all other classes of stock of the corporation"

In general it is thought best for individuals in your
situation to own real estate and lease it to the
corporation. The reason is that when you do that you can
take depreciation deductions which might be lost when the
property is owned by the corporation.

Another thing to remember is that, while the corporation may
be able to take advantage of past deductions against future
net income, when the money comes out of the corporation, you
will pay full tax on it at that time, unless the tax-free
dividend provision is passed.

Stu
 

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