Buying In Corp With Personal Funds
Im buying a house in a corporation to rehab that will be purchased with personal funds should that money first be put in the business bank account as a loan from me and then wired to closing or can i simply just wire the money to closing. Thanks
From an IRS standpoint, if the company is going to own the property, collect income and deduct expenses, you should place your money into the corporation account first and then dispurse funds.
Either way you do it , with a direct deposit to your S corporation or by wiring the funds from your personal account to closing will work.
Either way, the journal entry will read: "Loan from stockholder" and the money can be withdrawn at any time later with no tax consequences, since it will be called "repayment of loan from stockholder."
The reimbursement can be monthly, quarterly, or annually. I do mine annually.
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And if you own 100% of the S-Corp and are lending money to your Corporation, NO INTEREST need be charged.
My CPA explained to me the interest expense (if incurred by the S-Corp) is 100% offset by the interest income (if received by you) and there are no tax consequences to lending your S-Corp money.
No interest. No written agreement required. Just indicate "loan to company" and pick up the transaction when you have your taxes done. Do the same when repaying yourself your full or partial loan.
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thanks for the replys. it is an S corp lots of people say to do a loan and charge interest seems complicated the house will be a flip dont plan to own it very long. bargain kings idea sounds good any way to verify that any thing in the tax code that makes scorps different from regular corps as far as loans go. thanks everybody
You can do this if you have a home office/business, but the deductions are very restrictive (difficult to take under the law) for most people unless you business is a daycare (the rules are very generous for this business). All depreciation taken will be subject to tax when you sell the home.
If you provide more facts, we may be able to help.