S Corp investing in stocks

[Brian EA]

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

[Rapid Robert]

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?

[spanel]

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

[Jiggers]

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.

[kathyc2]

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.

[Xenon]

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.

[Brian EA]

Thanks all

Brian

[Uncle Sam]

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.

[Brian EA]

Thanks Uncle Sam