My State: New York
Hi, I recently set up an LLC for use in real estate investment (residential rental properties for the time being). I live in an area where housing prices are very low and I can therefore have a large positive cashflow each month. Even accounting for depreciation on my properties, I am making taxable earnings each year. I was thinking about a possible way of minimizing my taxable income from these properties. I'm sure I must have missed something though, so go ahead and poke holes in the plan.
Set up a C-Corp as a management company. That corporation would take care of the actual management of the properties, including finding tenants, evictions, repairs, etc. My existing LLC would then pay this newly created C-Corp for management, intentionally keeping the total income earned by the C-Corp under the $50K 15% tax bracket. However, that entire amount paid to the C-Corp would be deductible from the income of my LLC at my marginal tax bracket (28%).
Now with only a couple units like I have now it probably isn't worth the hassle for the small tax savings, but if I expand as I plan to, does this actually make sense? Is there some way that the IRS would disqualify this since both the LLC and C-Corp would be wholly owned by myself?
Thanks a lot!
Hi, I recently set up an LLC for use in real estate investment (residential rental properties for the time being). I live in an area where housing prices are very low and I can therefore have a large positive cashflow each month. Even accounting for depreciation on my properties, I am making taxable earnings each year. I was thinking about a possible way of minimizing my taxable income from these properties. I'm sure I must have missed something though, so go ahead and poke holes in the plan.
Set up a C-Corp as a management company. That corporation would take care of the actual management of the properties, including finding tenants, evictions, repairs, etc. My existing LLC would then pay this newly created C-Corp for management, intentionally keeping the total income earned by the C-Corp under the $50K 15% tax bracket. However, that entire amount paid to the C-Corp would be deductible from the income of my LLC at my marginal tax bracket (28%).
Now with only a couple units like I have now it probably isn't worth the hassle for the small tax savings, but if I expand as I plan to, does this actually make sense? Is there some way that the IRS would disqualify this since both the LLC and C-Corp would be wholly owned by myself?
Thanks a lot!