Who Should Own Your Business Real Estate?

If your business is incorporated, it might be a good idea to personally own the real estate used by your corporation.

*Taxes - If appreciated real estate is sold by a regular corporation, the gain will be subject to regular income tax (versus capital gains) and double taxation if the corporation distributes the money to you. However, if you own the real estate personally, there is no double taxation. Though the double taxation generally does not apply to S corporations, there can be tax problems when an S corporation sells its operating business together with its real estate.

By owning the property personally, you may well generate a tax loss on your personal tax return, however, you must give due consideration to the passive loss rules and other complexities of the tax law.

*Estate planning - You might consider having another family member own the real estate; then the property will not be part of your estate. That could save estate taxes depending on your personal circumstances.

*Other considerations - There are advantages to personal ownership of the real estate not related to taxes. As the value of the property increases, you may be able to generate cash by refinancing. Also, if the corporation does not own the real estate, you can more easily sell the business and keep the property.

*Downside - Personal ownership does however, create greater personal liability problems and possible additional Florida sales tax costs. There may also be other considerations in particular circumstances.

Be sure to consult an attorney as well as seeing us before you buy business real estate or change the form of ownership on real estate you already have.

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© Copyright 2001 Raymond S. Kulzick. All rights reserved. 010805.