June 26, 2024

The Main Tax Differences Between An S-Corporation and C-Corporation

57 minutes

Today, attorneys Toby Mathis, Esq., and Eliot Thomas, Esq., delve into listener questions around topics like borrowing from your QRP (Qualified Retirement Plan) without it being considered income, utilizing depreciation from syndications as a real estate professional, and writing off Airbnb setup costs. Learn how to establish accountable expense reimbursement plans for your C-Corp, handle taxes for disregarded property holding entities, and calculate depreciation post-1031 exchange. Discover efficient strategies for paying kids in your small business and choosing between S-Corp and LLC structures. Simplify the complexities of C-Corp taxes and learn how to invest in real estate via self-directed IRAs without UBIT implications.

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Highlights/Topics:

I am 65. If I borrow $30,000 from my QRP, would that be considered earned income?- No. You have to pay back with interest, but it is not income.

As a real estate professional, can I also take the depreciation expense from syndications against my spouse's K-1 income? - Generally yes, if you are a REP, and it’s non-passive activity, if there was an overall loss, it can go on your return.

Can expenses for building and outfitting an Airbnb spent this year be written off next year when the unit is rented? - yes, but it can only be written off after it has been “placed in service”

How do I establish an accountable expense reimbursement plan for my C -Corp and a medical reimbursement plan? - Have a corp meeting, and adopt the plans with documentation of that meeting.

If a disregarded property holding entity isn't taxed when our individual property expenses like taxes, insurance maintenance, and depreciation considered for income taxes? - Any income/expenses must be reported, flowing up into your 1040.

How do I calculate depreciation after a 1031 exchange? - It’s your original property purchase price, plus any improvements, less depreciation. This again is on the original building you had, the one that we're going to relinquish.

I want to include my kids as employees for my small business and I want to pay them in a lump sum annually. What would be the most efficient way to structure that? - If they are under 18 there’s no employment tax, if you are paying them through a partnership or a disregarded entity.

Is it beneficial to be an S-corp or an LLC if making under a certain amount of money? - You want to be in some kind of entity, to protect yourself from lawsuits.

What are the tax differences between an S and a C corporation? How hard are a C corporation's taxes to do? - Yeah, so the biggest tax differences between an S and a C then in a synopsis is the S corporation doesn't pay taxes, it passes it to its owners.

How can I use my self-directed IRA to invest in real estate deals without being subject to UBIT? - don't buy any real estate with any debt or anything like that and make sure it's a long-term rental, and not a flip.

Resources:

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