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    #1

    Investments In Corp

    I almost posted this to the thread about S Corp wanting to buy gold but I decided it would be more appropriate to start another thread.

    Does anyone know if investments that are held through a closely held corporation are available to satisfy personal legal judgments or other personal debt? Seems to me that if it works the protection of one's assets would be a good reason to own assets in a corp.

    Second, wouldn't an S Corp get to deduct all the losses sustained during the year against the gains in calculating what gets passed through to the owner and wouldn't capital gains retain their character? Also wouldn't dividends pass through as well? And wouldn't all investment expenses be deductible without the 2% of agi haircut? On the other hand, I suppose the owner would need to pay himself a salary for running the corp unless of course he's relying on a broker or financial adviser to make all the decisions. Of course only a very wealthy investor would gain from this arrangement but there are people with over a million invested.

    I don't think owning them in a C Corp makes very much sense. The main problems are the double taxation and what I believe to be the fact that you would lose on your individual return the capital gains character of some of the income while the obligation to pay yourself a salary would remain.

    Please correct me if I am wrong.
    Tags: None
    #2
    Originally posted by erchess View Post
    I almost posted this to the thread about S Corp wanting to buy gold but I decided it would be more appropriate to start another thread.

    Does anyone know if investments that are held through a closely held corporation are available to satisfy personal legal judgments or other personal debt? Seems to me that if it works the protection of one's assets would be a good reason to own assets in a corp.

    Second, wouldn't an S Corp get to deduct all the losses sustained during the year against the gains in calculating what gets passed through to the owner and wouldn't capital gains retain their character? Also wouldn't dividends pass through as well? And wouldn't all investment expenses be deductible without the 2% of agi haircut? On the other hand, I suppose the owner would need to pay himself a salary for running the corp unless of course he's relying on a broker or financial adviser to make all the decisions. Of course only a very wealthy investor would gain from this arrangement but there are people with over a million invested.

    I don't think owning them in a C Corp makes very much sense. The main problems are the double taxation and what I believe to be the fact that you would lose on your individual return the capital gains character of some of the income while the obligation to pay yourself a salary would remain.

    Please correct me if I am wrong.
    Now i'm not a lawyer, nor have I ever played on on the stage. But....
    that is one of the virtues of a corporation's owning assets in order to protect them from being touched by stockholders' personal creditors. There might be an exception, though, I say might. And that is if the fellow fraudently transferred them into the corporation in anticipation of other legal claims.

    Yes of course to the inadvisability of any corporation owning
    real estate or other non needed assets versus personal ownership.

    (That will be a double scoop of french vanilla for the advice. grin)
    ChEAr$,
    Harlan Lunsford, EA n LA

    Comment

      #3
      If you are a shareholder, in any type of corporation, your personal assets include your shares in that stock. Liability protection only protects actions within the corporation from going to personal asset, but not the other way around. Some actions within the corporate vail can pierce that vail and go toward personal assets.

      If you are looking to protect assets in a corporation, don't. Most corporations should be kept as lean as posible. The use of a Family Limited Partnership may be a better vehicle, especially income producing investments.

      The character of income in an S Corp is passed on to K-1, just look at all the lines on the K-1 for all the diverse issues.
      Last edited by BOB W; 11-08-2010, 06:21 PM.
      This post is for discussion purposes only and should be verified with other sources before actual use.

      Many times I post additional info on the post, Click on "message board" for updated content.

      Comment

        #4
        Might want to look at the rules for a "Personal Holding Company" as well.
        In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
        Alexis de Tocqueville

        Comment

          #5
          Originally posted by DaveO View Post
          Might want to look at the rules for a "Personal Holding Company" as well.
          Personal Holding Company, doesn't that only relate to C Corps?
          This post is for discussion purposes only and should be verified with other sources before actual use.

          Many times I post additional info on the post, Click on "message board" for updated content.

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