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Al_Sharpton_for_President says
Newco hasn't raised any money, and so you sell your $800,000 home to Newco for a nomnial fee, let's say $1.00.
IRS and most state revenuers will come down on that like a ton of bricks, I bet.
Depreciation is the big expense
EBGuy says
Depreciation is the big expense
Thanks! Is annual depreciation mandatory, or can you not do it to avoid depreciation recapture upon sale, or, in this case, transference back to the former owner (sole shareholder)?
Premise: You form a corporation, Newco RE Industries, Inc. for which you are the sole shareholder. Newco is in the rental property business. Newco hasn't raised any money, and so you sell your $800,000 home to Newco for a nomnial fee, let's say $1.00. Newco then rents out the home. You are also the sole employee of Newco, and take no salary.
Newco is interested in scouting out potential investment properties in interesting locales - Chang Mai, Thailand, the Cinque Terra, Italy, coastal Spain, the Alps ,etc. Newco flies you out where you spend a few weeks at each location scouting potential property opportuities. To keep it even more legit, you actually meet with RE agents. Newco books you into very nice hotels, and you eat quite well. They also book you very nice flights, too. Newco expenses all of this as legitimate business expenses
Between the maintenance costs, property manager costs, and these business development expenses, that $42,000 is zeroed out to zero income. No taxes to be paid. You have then taken very nice vacations and have been able to expense them through the company. When you get tired of this business, you shut down Newco, and turn over the company's assets to the shareholders, you.
Is this possible?