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    S Corp investing in stocks

    S. Corp earnings for 2016 was $150,000. Owner is interested in investing in Stocks through the S Corp in order to lower taxes

    Any advice on researching this topic will be very much appreciated

    Thanks

    Brian
    Everybody should pay his income tax with a smile. I tried it, but they wanted cash

    #2
    Originally posted by Brian EA View Post
    S. Corp earnings for 2016 was $150,000. Owner is interested in investing in Stocks through the S Corp in order to lower taxes
    Are you sure he wouldn't rather increase his net after-tax income?
    "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

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      #3
      Originally posted by Brian EA View Post
      S. Corp earnings for 2016 was $150,000. Owner is interested in investing in Stocks through the S Corp in order to lower taxes

      Any advice on researching this topic will be very much appreciated

      Thanks

      Brian
      How would this lower his taxes? The act of purchasing stocks does nothing to your P/L and only affects your B/S. When the corp sells the said stocks the gain/loss flows through to the shareholders just like the P/L.

      Chris

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        #4
        Originally posted by Brian EA View Post
        S. Corp earnings for 2016 was $150,000. Owner is interested in investing in Stocks through the S Corp in order to lower taxes
        The only way he can reduce taxes is to lose money on the stocks. Why would he want to do that?

        The S-Corp is a pass-through entity. The gain or loss passes through to the shareholder.
        Jiggers, EA

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          #5
          Also, if he would ever need to use the limited liability protection of an corp, the stocks being as asset of the corp would be used to pay debts.

          Comment


            #6
            Watch out for the passive income tax at the top corporate rate and also termination/liquidation. If the company closes, the assets cannot be distributed without a taxable event, i.e. gain if there is stock appreciation.

            If it's a little investment to keep the cash working for him, it should be fine. If it's a lot, it's not a good idea. Either way, I don't see it saving tax dollars.

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              #7
              Thanks all

              Brian
              Everybody should pay his income tax with a smile. I tried it, but they wanted cash

              Comment


                #8
                One extra thought - I know there's a provision that if the investment income exceeds 25% (not certain of %) of the total income - S Corporation can either automatically be revoked or there's a penalty for exceeding the limit - I suggest you review the S Corporation requirements.
                Uncle Sam, CPA, EA. ARA, NTPI Fellow

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                  #9
                  Thanks Uncle Sam
                  Everybody should pay his income tax with a smile. I tried it, but they wanted cash

                  Comment

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