Tax Benefits Of Keeping Business Related Real Estate Out Of Family Owned Corporations

Tax Benefits Of Keeping Business Related
Real Estate Out Of Family Owned Corporations

by Bernard Fruchtman, Esq.
( This article is excerpted from TaxTalk – Plain & Simple)

Background:

An important reason to keep business real estate out of family owned corporations is to avoid double taxation upon the sale of the real estate.

Whenbusiness related real estate is owned in a family corporation and sold the following taxes apply:

  • Corporate. The corporation will own capital gains tax on the difference between its tax basis (generally, cost less depreciation) and its selling price.
  • Shareholders. The shareholders of the corporation will owe a tax when the sales proceeds are distributed to them via a dividend or liquidating distribution.

ALERT: It’s possible to avoid the double taxation if the family business is operated under a S-Corporation. More…