March 21st, 2010
is it legal to buy/sell company property to your personal self if you own the company as a tax shelter method?
Scenerio: you own a successful company that makes millions. Is it legal for your company to buy property (like a company car, boat, plane or whatever) to lower your company’s profits, then turn-around and sell those company properties to your personal self for $1.00. Would this be a successful tax sheltering method?
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Filed under: Buy Property
It would be a successful method to get a tax deficiency with penalty assessed against you.
The IRS would disallow this “sale” as the purpose of the transaction is to avoid income tax on the part of the person receiving the asset, and to falsely lower the income of the company.
The company would not be able to take a deduction for the “loss” and the person purchasing the vehicle would have income in the amount of the value of the asset regardless of the purchase price.
No. This is your second similar tax evasion question today.
Items must be sold/distributed at FMV. So the $30,000 car sold for $1, triggers the requirement that the asset be listed as sold on the books at $30,000 and a 1099-DIV be issued for $29,999 (if a c-corp, for an s-corp, it won’t make a difference as the $29,999 will show up on the 1040), thus boosting the company’s income right back up to where it was.