Tax Question

[mcladonn]

Hi,
I am reading all three of Don Campbell`s books as fast as I can and I plan to join REIN and go through Quickstart and the whole nine yards. But I have a question right now that I am hoping someone can help me with.

My husband and I both work full-time and are soon going to receive approximately 50k from the sale of an investment property. We would like to turn this into several revenue, buy and hold type, rental properties. I am just wondering from an income tax perspective what is the wisest way for us to do this?

Thanks in advance for any suggestions you might have.
Donna

 

[mark186]

The wisest thing to do would be not selling the investment property and incurring a taxable capital gain of $50,000. A more prudent action from a tax perspective would be to talk to your bank about taking the equity out of the existing property (likely through a homeowners line of credit) and using that money for your downpayment (s).

 

[mcladonn]

Hi,
Thanks for your reply. We were in with a group of land owners and the majority agreed to an offer, so it is sold. So given that, any suggestions? Should my husband and I form a corporation or does that matter?

Donna

QUOTE (mark186 @ Jan 24 2008, 02:10 PM) The wisest thing to do would be not selling the investment property and incurring a taxable capital gain of $50,000. A more prudent action from a tax perspective would be to talk to your bank about taking the equity out of the existing property (likely through a homeowners line of credit) and using that money for your downpayment (s).

 

[George]

Good afternoon Donna,

Setting up a corporation now won`t help significantly, if at all, with respect to the sale on the horizon. The question will end up being what you should do in the future. In determining an appropriate structure for you, I highly recommend talking with an accountant and lawyer regarding your family`s particular situation. There are too many variables that need to be considered, and tax in my mind should only be one of the factors weighed (it`s actually 3rd on my list despite the fact that I`m an accountant), and thus the need for a more detailed conversation. Strictly from a tax perspective, the corporation may or may not be advantageous for you.

In searching the various forums you should find a few discussion threads where Navaz and I, among others, have touched on the use of corporations if you`d like a little background information in preparation for your discussion.

Warm regards...

George

 

[ToddStokowski]

I agree with George.

Todd Stokowski, CA

 

[Thomas Beyer]

celebrate ! buy a boat .. go to Hawaii .. buy a new car !

Then: invest the after-tax proceeds .. hundreds of choices !

I do not follow the corporations vs. personal discussion. A corporation has annual cost of ca. $2000 for legal, registration, accounting and tax filings. For 50K it may not be worth it. The main benefit is you can pay yourself, and some folks like your kids and spouse some salaries that are reasonable, so you get some income splitting. You also are protected from liability, potentially.

What is the purpose of the corporation ?

What is your investment objective ?

How much time do you wish to spend investing and then monitoring the 50K ? 2 minutes ? 2 hours ? 2 days ? 2 months ?

 

[MikeMcCrae]

The age old question...to incorporate or not to incorporate. From a financing point of view I can be absolutly positive when I tell you, the answer is, it depends.
You really need to examine your plan and where you want to go and when. Some lenders require a company and some won`t deal with a company. Figure out where you want to go then structure your plan on how to get there.