how to buy a house under a corporation

Most sellers of will list a phone number, email address or website that you can use to communicate your interest in the property.
Finance your real estate purchase using your corporation.
Contact the real estate agent or owner who has offered a property for sale that you want to buy.
Buying real estate with a corporation can spare you from personal liability.
Submit a loan application to obtain financing for your real estate purchase.
Submit a contract to purchase real estate using your corporate name.
Cole writes for eHow and "SF Gate." As a small business owner for over 15 years, he provides mortgage services, credit-related help and financial planning for his clients.
Purchasing real estate may help increase the assets and credit rating for your business.
Present the tax identification number for your corporation to the closing agent to ensure that the property is deeded and taxed accordingly.

Some hedge-fund managers and bankers, for example, bought under LLCs when they "normally wouldn’t have," says Edward Mermelstein, a real-estate attorney in New York.
And co-op apartments in cities like New York are resistant to allowing people to buy under a legal entity because co-op boards tend to prefer named owners, says Ron Gitter, a real-estate attorney in Manhattan.
For property purchases of $10 million or more, "it’s done almost 100% of the time," says Tomer Fridman, a partner at Ewing & Associates Sotheby’s International Realty in Calabasas, Calif.
Over the past year, 27% of U.S. homes that sold for more than $5 million were bought by LLCs or trusts rather than by individuals, Zillow data show.
Applying Section 721, 722 and 723 to our case study, A recognizes no gain on the transfer of property with a basis of $400,000 and a fair market value of $1,000,000 in exchange for a 50% interest in the partnership.
If, for example, A’s property were subject to a $700,000 mortgage, the transfer of the property to a corporation in exchange for corporate stock would generate $300,000 ($700,000 debt relief less $400,000 tax basis) of gain to A, even if the transfer were otherwise tax-free under Section 351.
If the property were transferred to a corporation, Section 357(c) would apply and A would be required to recognize $300,000 of gain on the transfer for the excess of the liability over the tax basis of the property.
If you contribute appreciated property to a corporation in exchange for, say 20% of the corporation’s stock, but simultaneous to the transfer, another two individuals transfer cash or property to the corporation in exchange for an additional 65% of the stock, all three transfers are covered by Section 351 because on a combined basis, the transferor group controls the corporation immediately after the transfer.
Under Section 357(c), if you transfer property to a corporation that is subject to a liability and the corporation assumes that liability as part of the transfer, the transfer triggers gain to the extent the liability exceeds the tax basis of the property.
Under Section 336, when a corporation transfers appreciated property in a liquidating distribution, the corporation recognizes gain as if the property were sold for its fair market value.
Thus, barring a statutory exception, if A were to transfer the building to a corporation in exchange for the corporation’s stock, A would recognize $600,000 of gain ($1,000,000 fair market value less A’s $400,000 tax basis).
The tax inefficiency is only exacerbated if A would like to get his hands on the remaining $790,000 ($1,000,000 less $210,000 tax liability) of purchase price.  If the corporation liquidates and distributes the net cash to A, A would be required by Section 331 to recognize capital gain for the difference between the amount distributed and A’s basis in the stock.
If a partnership transfers property to a partner in liquidation of the partnership, no gain is recognized by either the partnership or the partner; rather, the partner simply takes a basis in the property equal to the partner’s remaining basis in the partnership interest, after reduction for any cash received or debt relief.
If the property were distributed in a liquidating distribution, under Section 331 A would be treated as having received property worth $1,000,000 in exchange for stock with a basis of $1,000,000, resulting in no further gain or loss.
Section 351 is one such exception to the general rule of gain recognition, however, as it allows you to contribute appreciated property to a corporation in exchange for the corporation’s stock without recognizing gain provided you “control” the corporation immediately after the transfer.
Because Section 731 provides that a partner will only recognize gain on a distribution if the cash (or liability relief) distributed exceeds the partner’s basis in the partnership interest.
Combiningg these rules with the partner basis rules of Section 722, it becomes much less likely that a partner contributing leveraged property to a partnership will recognize gain.
This means that if the S corporation distributes the property to A in either a non-liquidating or liquidating distribution, the S corporation will be treated as if it sold the property for its fair market value of $1,000,000, triggering $600,000 of corporate level gain.
A receives $790,000 of payment in exchange for his stock with a $400,000 basis, resulting in long-term capital gain of $390,000 that is taxed at a maximum of 23.8%. As you may have noticed, these are the exact same tax consequences that would arise if the corporation had simply sold the building for cash and distributed the after-tax proceeds.
If the partnership distributes the building to A, neither A nor the partnership will recognize any gain on the distribution, despite the fact that the building’s fair market value of $2,000,000 greatly exceeds its tax basis of $300,000.
You don't go to a foot doctor for brain surgery so make sure your CPA and FA are currently putting into practice what they are telling you to do! The worst advice is free advice(ironic as I typing this for free) Depending if you want to just rent this one property or several, where you live, married or with a partner, claiming all cars as work vehicles, working in the house or renting an office, etc; all variables in your equation will have a direct correlation with what type of protections i.e. entity you will want to have.
If the house were used for business purposes and was owned by an LLC (title was in the name of the LLC) then the gain on the sale would have to be reported by the owner of the LLC on his or her individual income tax return.
The sale of a house by an S corporation to one of its shareholders would be treated as a long-term capital gain (if the corporation owned the house for more than one year).
Since title does not change, there is no sale and no capital gains issue until the individual sells the house to an independent third party.
Buying real estate under a corporate name is a great way to save money on taxes and ensure that the individual who runs the corporation isn’t liable for whatever may go wrong.
Before jumping into real estate investment, one of your big considerations should be the type of protection you’ll have if something goes wrong.
The benefit of using an S corp or LLC to own property is they are treated as a separate entity that is responsible — as opposed to shareholders or members — for any liabilities that may arise from the real estate investment.
If an S corporation owns residential property or another type of real estate and the property is distributed to a shareholder, any gains on the property become immediately taxable at an unattractive rate.
The income from investment property owned by an S corp must be distributed to shareholders based on the proportional ownership of each owner.
Rental income from residential property owned by the S corp would pass to the shareholders as passive investment income.
As a result, it is probably not a good idea to use the S corporation to buy residential property that you eventually want to pull out of the corporation’s name and switch ownership to one or more of the S corp shareholders.
If the S corporation realizes a loss on a real estate property, that loss would be passed through for a shareholder to use on a personal tax return.
Purchasing 1 property in a corporation in my opinion is probably a waste of time and complicates your taxes.  It’s also difficult to get insurance on an investment property in a corporation name, especially if it’s a flip.  I would recommend getting an umbrella policy on yourself, and purchase the home in your personal name.  You can still deduct the expenses, and the capital gains will be taxed like any other investment.
I recommend you consult a couple of CPAs knowledgable in Investment Property to get their opinion.  Be careful, they make more money when you open a corporation and have to to corporate taxes too.
Forming a separate legal entity, such as a corporation or limited liability company – and in some cases, a limited partnership – can help shield your own personal assets against claims against your investing business.
On the other hand, if it’s not you who owns the property, and it’s not you personally who contracts with the workers and contractors fixing and preparing your properties, but a corporation, you have some degree of protection, due to the legal doctrine of corporate personhood and limited liability.
Does the business proposal for the loan make sense? Will this deal go smoothly? Has there been any transaction in the past that shows a history of success with similar transactions specific to this company.
If there are gaps can a co-signer or personal guarantor step in? Someone to back up the company given that it lacks the ability on its own at this point? Assuming yes, could the guarantee be limited to 12 or 24 months so that the loan is only in the company's name after that point.
When the loan for real estate is similar banks will offer the company financing.
The reason for the personal guarantee is because the corporation can not prove income, has little or no assets other than the house or property that is being purchased.
A company can get a credit card or account with Home Depot, Staples and other such places pretty easy because the amount is small relative to the company's size and income.
Note also that a loan for real estate to a company is not going to be on the same terms and conditions that it would be to a person.
It all depends on the lender and their bank policy and their current loan portfolio (i.e. if they already have too many real estate loans–and yes that is regulated–then they're not going to add one that's not really an awesome deal for them).
Real estate is no different then other forms of business credit other than two factors.
Assets? Does the company have assets that shows that it is will not go away quickly? That other assets could be sold if needed to pay back the loan.
You should have the deed in the corporate name and have all income documented to the corporation so the company will start to have assets etc.
The best way at least for the first few years is to co-sign the loan for the corporation and build the credit.
Many how-to articles, success notes from real investors and active forum discussions (investing, legal, commercial property investing, financing and manufactured housing are the main discussion area – each with a separate forum).
A corporation is a very common form of business ownership in the United States because it offers its owners some important advantages.
This means that the owners of a corporation aren’t personally responsible for the debts and obligations of the corporation except to the extent of their investment in the business.
A corporation is a limited liability entity that is treated as a legally separate "person" from its owners.
To purchase real estate, a corporation must authorize someone to purchase the property on its behalf.
An S corp provides its owners protection against liability caused by business activities such as debts and negligence.
Engaging in purchases of residential real estate clearly falls within a lawful business activity that corporations can pursue.
Sometimes people contemplate using an S corporation to purchase real property.
Lenders and sellers usually require written proof of the authority of the representative to purchase the property, such as a certified copy of the corporate resolution authorizing the purchase.
To determine the scope of a corporation’s authority, you simply have to look up the relevant corporate statute in the state where the corporation is organized.
If you are about to purchase a home and are self employed, then it is very important that you watch this video, because I am going to tell you how to buy a home with your company's money, tax-free.
The strategy entails taking money from your corporation and giving it to you on a tax-free basis in order to help you acquire a house that you plan to live in.
Allan Madan is a Chartered Accountant and a Tax Expert in the Toronto, Mississauga and Oakville regions of Ontario, Canada.
As to safety question, you are perfectly safe holding property either in your name or with a company you own, Foreigners have the same rights as Costa Ricans under the law, which has also been upheld many times by the Constitutional Court.
Many people who are buying property in Costa Rica wonder if they should use a holding company to own the property or keep it in their own name.
Transfer Tax savings – If you are buying or selling a property that is in a company name, you avoid paying the transfer tax in the National Registry, since the name of the property owner will not change, only the shares will be transferred.
Should I buy house under my name or corporation name? – Real Estate in Costa Rica – Retire, Live or Travel in Costa Rica.
Reply With Quote LOG IN TO THANK 1 person has thanked PhuFighter for this post.
Reply With Quote LOG IN TO THANK 1 person has thanked stealth for this post.
Reply With Quote LOG IN TO THANK 1 person has thanked BuildingHomes for this post.
Reply With Quote LOG IN TO THANK 1 person has thanked bririp for this post.
Reply With Quote LOG IN TO THANK No one has yet thanked everylittlecent for this post.
Reply With Quote LOG IN TO THANK No one has yet thanked 38racing for this post.
What are the benefits/disadvantages to putting into my personal name or under a corporation? I am not sure if I plan on keeping it for 20 years+ to supplement my retirement income or if I will flip it in a few years.
Please login or register.
Welcome, Guest.
I know I would have to paid "Capital Gain" taxes on the property when I sell it, but my main reason for using the business is the write off of the interest payments and the flexible with the "Line of Credit" especially lump sum payments.
I plan to put almost all the company profit into paying off the "Line of Credit" as a way to reduce tax payments; this is another reason I am using this strategy.
Depending how much the house increases in value, I doubt the benefit of being able to deduct the interest expense will offset the taxable benefit that comes when you sell the place.
The company would pay interest on the "Line of Credit", which I would write off as an "Interest Expense"; this is one of the main reason I am using this strategy.
If you’re living in the house and working from it, I would think it makes more sense to write off some of the house expenses against whatever rent the company is paying you.
If you’re tired of taking millionaire advice from your broke uncle, your paycheck-to-paycheck friend, or your 30K millionaire co-worker, register today and get the uncensored, and yes, the sometimes uncomfortable truth from real millionaires who live and die in the entrepreneurial trenches.
Talk To Other Millionaire Entrepreneurs … for FREE! Some people take advice from millionaires, others take advice from people who want to be millionaires.
Tagged with appreciated, bank, basis, borrow, C corporation, corporation, debt, depreciated, distribution, equity, lender, limited liability company, llc, loan, mortgage, partner, partnership, property.
If you personally take a loan from a bank and then loan it to the corporation, this is not an obligation of the corporation, this will increase basis even though the corporation is making payments on it because the shareholder is the only party responsible and the bank can only go after the shareholder, not the corporation.
your point is well taken, BUT, i would only agree with you that when a shareholder personally guarantees an “obligation of the corporation” it is not increase in basis, unless, and only unless an actual economic outlay occurs by having the shareholder actually pay the debt if the corporation defaulted on it.
the same would exist if the shareholder directly loaned money to the corporation and the corporation made payments back to the shareholder, your debt basis would increase then decrease as payments are made back to shareholder.
Transfers of mortgaged property to an S Corporation does not increase the basis of your S Corporation stock and thereby could severely limit the deductibility of future losses from that property.
As far as the mortgage is concerned ive been treating the contribution of the property to the corp in the same manner as you would in a partnership……your baisis is first increased by the adjusted basis of the property, then it is decreased by the mortgage assumed by the partnership/corporation, then it is increased by the mortgage amount re-assumed by the partner/shareholder IF you are personally responsible (assuming you are in a recourse state) even though the partnership/coproration is making the payments, so this transaction happens all at once.
All tax losses are limited to the shareholder’s basis in the S Corporation stock, which does NOT include third party debt, such as a mortgage.
Transfers of debt-free appreciated property to an S Corporation are taxable if the contributing shareholder is not in control of the corporation immediately after the transfer.
Hi Allan can the corporation lend money to the shareholder’s children to purchase a home? Assuming interest will be paid at the market rate and a loan term is established.
This entry was posted in Real estate tax and tagged accountant mississauga, allan madan, Real Estate Agents, Real estate taxes, Tax Savings Strategy, Tax savings strategy for real estate agents, tax tips, Tax tips Canada.
In order to qualify for an Employee Home Purchase Loan from your corporation, you must be an employee of your corporation.
In conclusion, the Employee Home Purchase Loan is an excellent answer to the question, “How to buy a home with a Corporation in Canada?”.