Level Luxury Real Estate Corporation

Welcome to Evans & Company’s tax blog site. My vision for this site is to publish a new article on a monthly basis. Unlike many “canned” tax news sites my vision for this feature is that original articles written by Nicholas Evans will be published on a monthly basis. Posts may be based on current tax news/changes or, as in the case of this initial post, on actual client situations. By focusing on issues that apply to our client base the hope is that this will educate Evans & Company clients in particular with regards to tax issues/strategies that are specific to them as well as providing a resource to the broader tax community. Please feel free to contact us directly with any questions or comments you may have on a particular post.

With that said it is time to get right to it! Today’s post will explore when it COULD be actually beneficial to contribute real estate to your C-Corporation (a long taboo subject). This is based on an actual client situation where we developed this unusual strategy to achieve significant tax savings. As will always be the case in looking at specific client situations actual client names have not been used.

WHY IT’S NOT ALWAYS A BAD IDEA TO CONTRIBUTE REAL ESTATE TO YOUR C-CORPORATION

Every newly minted CPA has been instructed almost from Day 1 to inform their clients that it is unwise to contribute appreciated property (specifically real estate) to their C-Corporation. This philosophy has, in fact, become so ingrained that it is almost accepted as a matter of faith. A conversation might go as follows:

Client: I’m thinking about putting my building into the name of my Corporation. What do you think?

CPA: That’s really not a good idea.

Client: Really. How come?

CPA: It just isn’t . . . there could be some pretty bad tax consequences.

Client: Hmmm. Okay, thanks.

As the above hypothetical conversation shows (and it’s really not all that hypothetical) many new and even mid-level CPAs have become so indoctrinated in this theory that they often loose sight of the reason why it’s not a good idea to put property into a C Corp. Instead they tend to fall back to the tried and true response of “it just isn’t, ” or some variation thereof. In fact this bias has become so accepted that a CPA who even suggests otherwise runs the risk of being chided by their more erudite colleagues.