Corporation Home Ownership?

Question

I curious about something. Its my understanding that corporations can sometimes benefit from through the purchase of a home versus that of an individual home purchase. I believe that there are more tax advantages such as writing off insurance payments, interest paid on the property mortgage and even property taxes. I have a business which i have been operating out of my apartment for 4 years now and would simply like to consider the idea of purchasing a home. Has anyone bought a home in the similar fashion Im thinking of when it comes to purchasing through a business? - Any advise would be greatly appreciated.

Answer 1

I'm pretty sure you have to allocate any and all expenses between personal and business use. So the tax advantages wouldn't be as great as you're describing in your question.

Answer 2

I am also curious about this.

The basic plan would be sell your home to your corporation. Then have your corporation offer to rent the house back to you. One way you might achieve this is to have your corp. get a first trust deed against the property. You get the cash, the corporation gets the payment.

This would seem to give you many advantages
1. You’d be a renter, rather than a homeowner so you personally would have enhanced asset protection.
2. You could rent the home furnished with utilities included so these become expenses of the business.
3. You could then depreciate the home just as you would any other income property.
4. Any improvements you make on the home now become capitalized business expenses. These of course add to the value of the structure, and become depreciable too.
5. The costs associated with operating the business would also be legitimate expenses.

Some disadvantages would be
1. Loose your capital gains exemption on the property as long as your corporation owns it. But I wonder if you could buy it back from your corp. at a later date, reside in it for a given amount of time and reestablish your capital gains exemption.
2. You would have to incorporate and operate your business. With board meetings, and tax filings. This could take some time.

As I wrote this is the way I see it. I am going to meet with a tax attorney and see if my assumptions are correct for my situation. I wish you the best of luck with getting answers to your question.

As follow up - My attorney says for me it does make sense, and my assumptions were basically correct. But it will trigger the “due on sale / due on transfer clause” on my mortgage. Also we will need to rent at a comparable market rate. The LLC is the structure he suggested for us. Understand that any profit this rental arrangement generates is reported back on your tax return as income, so profits are in effect double taxed.

Given that I will also be building a real estate business under that LLC, I can use the cash flow from the rent-back arrangement to off-set the expenses associated with building the real estate business.