Real Estate in C Corp

[MajorTH]

What is the name of your state (only U.S. law)? Kansas

Sole proprietor farmer placed farmland into his newly formed C-Corp back in 1977. Obviously, it is a bad idea to have land in a C-Corp today. Did farmer get bad advice from the attorney to place land in his C Corp back in 1977 OR what changed in tax law that creates the various adverse tax consequences today? I understand something may have happened during the 1986 tax act-if so what? Was there an advantage in past years of putting land in a C Corp? Any insight would be appreciated.

 

[LdiJ]

What is the name of your state (only U.S. law)? Kansas

Sole proprietor farmer placed farmland into his newly formed C-Corp back in 1977. Obviously, it is a bad idea to have land in a C-Corp today. Did farmer get bad advice from the attorney to place land in his C Corp back in 1977 OR what changed in tax law that creates the various adverse tax consequences today? I understand something may have happened during the 1986 tax act-if so what? Was there an advantage in past years of putting land in a C Corp? Any insight would be appreciated.

You are talking about something that happened 37 years ago. There is no way to determine what conditions existed at the time that might have made a C-Corp appropriate. There of course have been tax law changes since then, but what changes, if any, would have impacted that particular farmer are difficult to say.

If this is a homework question, we don't do homework.

 

[davew128]

In 1977 I was playing with Star Wars action figures. Beyond that, I assume you can use google, which I understand did NOT exist back then.

 

[LdiJ]

In 1977 I was playing with Star Wars action figures. Beyond that, I assume you can use google, which I understand did NOT exist back then.

Gawd I am old...I was in college in 1977.

 

[MajorTH]

No this isn't a homework question and it is not specific to this farmer-just used it as an example as there are many situations like this that people/businesses are trying to get RE out of C Corp. Just wondering about general concepts that may have been in place in those days that may have been advantageous for RE in C corps. Farmer is a bit grouchy at all the legal fees trying to undo what happened years ago.

Farmer just chose Section 368 reorg and working on Section 355 divisive D reorg with the hopes of preventing the BIG tax within 10yrs.

I apologize for asking what appears to be a stupid question.

 

[LdiJ]

No this isn't a homework question and it is not specific to this farmer-just used it as an example as there are many situations like this that people/businesses are trying to get RE out of C Corp. Just wondering about general concepts that may have been in place in those days that may have been advantageous for RE in C corps. Farmer is a bit grouchy at all the legal fees trying to undo what happened years ago.

Farmer just chose Section 368 reorg and working on Section 355 divisive D reorg with the hopes of preventing the BIG tax within 10yrs.

I apologize for asking what appears to be a stupid question.

Its not a stupid question, its just unfortunately one that probably cannot be answered by anyone practicing now. Most of us who are tax professionals or attorneys, would not have been in business 37 years ago, and those that were, really couldn't tell you why it might have been a good idea, at the time, for that particular farmer.

 

[FlyingRon]

Believe me the tax, etc... picture was completely different 37 years ago. That was right in the middle of the "tax shelter" era with all sorts of odd ownerships including limited partnerships, etc...

 

[davew128]

MajorTH, the problem you have is that you're asking volunteers to do historical research on an era completely different than the one we're operating in. That's time consuming. I can tell you NOW why its a horrible idea, I could tell you 10 years ago it was a horrible idea. 37 years ago? Even S corps as we know them now were VERY different 37 years ago.

 

[MajorTH]

I apologize davew128 but no where in my thread was I asking anyone to do any research for me-I don't expect anyone to do that. Many on this blog have great insight and years of experience, thus I thought perhaps some may have experienced a similar situation before. Thanks for the help.

I just need to tell this farmer it is all water under the bridge and we can't go back and redo it. Laws change.

 

[Zigner]

I apologize davew128 but no where in my thread was I asking anyone to do any research for me-I don't expect anyone to do that. Many on this blog have great insight and years of experience, thus I thought perhaps some may have experienced a similar situation before. Thanks for the help.

I just need to tell this farmer it is all water under the bridge and we can't go back and redo it. Laws change.

Yes, you did ask that.

 

[MajorTH]

Zinger-I'm sorry my communication inferred I was asking for someone to research for me. Honestly, that was not my intent or desire at all-you have more valuable things to do with your time. Keep up the good work.