Family Corp.

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  • Gretel
    Senior Member
    • Jun 2005
    • 4008

    #1

    Family Corp.

    I got one of "these" where everything is mixed up.

    Son works as IC for corp. and buys semi & excavator. Son paid for both and has loans on both, which he is paying for. Corp. pays for insurance (is also insured in corp. name to save money) and semi and some other expenses as compensation for 20% use of equipment that is not son's business but just corp's.

    I am only doing son's 1040.

    I know corp. should do it differently but do you forsee any serious problems with this?
  • OldJack
    Banned
    • Dec 2005
    • 1689

    #2
    Well it sounds messy. Can you say the corp is renting/leasing the equipment and show the son as a Sch-C business with equipment rentals and other excavation and hauling income. The devil is in the details.

    Comment

    • Gretel
      Senior Member
      • Jun 2005
      • 4008

      #3
      Thanks, Old Jack, that is the way to go. Hope son can find out how much corp. paid for him. Guess otherwise I have to reduce all his expenses related to the equipment by 20%. It's the same thing as bartering income, right?

      Comment

      • OldJack
        Banned
        • Dec 2005
        • 1689

        #4
        Well I hadn't thought about it as bartering but I suppose there might be a case for that. However, since there is a relationship here I would think the corp would provide all details for you. I would be afraid to just reduce expenses as on audit the income might be computed and you would be left trying to prove expenses.

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