Can YOUR company purchase YOUR house, and can you still live in it rent free?

Question

I am trying to find ways to limit my company's income tax debt by spending the profits as expenses before it is taxed. I came up with the idea that My company could purchase the property from myself with say another $100,000 tacked to the price. The mortgage every month would be paid with pretax dollars instead of my income which I derive from my company. As the owner of the company, I would still live in the house.

Answer 1

That's not going to save you a dime. Actually it will cost you money.

First off, the company will not get ANY deduction for the mortgage or property taxes as it's not a legitimate business expense tied to the generation of taxable income; it's a tax dodge, pure and simple. And as you didn't personally pay the mortgage interest or property taxes, YOU don't get a deduction either.

Second, the fair market rental value of the home would be taxable income to you.

Third, the purchase at $100k over market would not withstand arms-length scrutiny. The excess would likely be considered taxable income to you.

Answer 2

You need to talk to your CPA to see how such a sale affects your personal income taxes and if you qualify for the one time tax exemption. You will need to determine if your company is a corporation or if it is an entity that will funnel the profits and losses to you at the end of the year such as an LLC and or propietorship. If the entity stands alone such as a C corporation there should be no problem if your CPA says that it is in your best personal tax interest. However the corporation would have to qualify with a lender to acquire a new loan to buy the property and a tax lawyer should help you determine if you and your corporation can make such a transaction stand the arm length transaction test the IRS would apply.
Best of luck to you.

Answer 3

you would have to use a partner who you would then separate from , then they would take the business 50/50 , this will limit stamp duty , and some taxes , your business will have your name as the sole trader , which means your shifting taxes , to do it right you need to have a partner , separate , and then halve the taxes between you two , or liquidate , and then send the interest to a trust which is divided to an estate. or land trust. talk to your accountant , they will come up with legitamate ways to limit tax these ways are time related , and high profit risks always seem to backfire .

Answer 4

That's called tax evasion, and if you are using your company to offset personal expenses that are manufactured rather than real, expect to get caught.

Answer 5

The IRS and the accountants wouldn't like it and wouldn't allow it.