Not sure if this is the right forum for this, if not, I apologize. Have a client who owns two S corps with his wife. Company A owns the land and building and Company B is the marketing company (chemicals). He has been running Co A at a loss because his rent income isn't enough. I would like to see Co A break even and have Co B show the P&L from the marketing which is the core business. To do so, Co. B would have to pay sufficient rent to Co. A to cover A's expenses and net them out to zero. Obviously the rent would fluctuate from year to year. Any problems with this? Thanks.
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Not sure if this helps, but see 19-3 of TTB Deluxe Edition. Qualified Subchapter S Subsidiary. It won't work with the current ownership structure, but if one S owns another S 100%, the QSub is disregarded for tax purposes. You can still have two corporations for liability purposes, but only one tax return.Originally posted by Greenbriar View Post -
Not a Qualified S
Luis,
Thanks, but one S corp is not owned by the other. 2 separate S corps, both owned by my client and his wife.
PaulComment
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Why
are things structured this way? It seems to me that in economic reality there is only one business unless I am missing something, such as other tenants in the facility rented by the chemical company. I think that the way things are supposed to be done is to have either one corp or have one corp own the other. You can achieve whatever you are out to achieve such as better insulation from lawsuits, but you have to do things in the right way.Comment
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Is QSUB a possibility?
These S corps were established before they became clients. Both are owned by the husband and wife. I wish they were one corporation. Is QSUB possible? Can H & W sell stock in Co. A to Co. B, or vice versa, and in effect consolidate both companies? My research so far indicates it can be done, but I'm having difficulty finding anything on the tax consequences to the husband and wife. Any help is appreciated.Comment
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