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How can I convert personal property into owner equity?

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slac.in.the.box

Guest
I realized that I have personal property that I've been selling off to pay business expenses before the business is profitable (70 stainless steel baskets that I purchased from the airforce at an auction in 2007). In 2019 I sold twenty of them for $2000, and used that $2000 to pay for virtual hosting expenses ( right now the corporate back end I am developing runs on 14 virtual machines hosted by Linode, and they add up to roughy $200/month).

There's a place on the Schedule-C for inventory. Without advice, what I concocted was that I loaned the c-corp a dollar, and then the c-corp ibought 20 baskets from myself for a dollar, and sold them for the 2k. But what about the other 50. Should I sell all of them to the corporation, list them as end of the year inventory? And what about the beginning of the year inventory? I owned them personally but hadn't used any for business yet. I'm not in the business of selling stainless baskets; but they are helping offset the cost of operation during startup. How do I document that? And they take up at least 60sq.ft. of my mother's garage, 6 miles away--business use of someone else's home; so I need the extra 8829 form cause it's a second property... it starts to get pretty complicated pretty quickly. Hope these professionals respond.
 


LdiJ

Senior Member
I realized that I have personal property that I've been selling off to pay business expenses before the business is profitable (70 stainless steel baskets that I purchased from the airforce at an auction in 2007). In 2019 I sold twenty of them for $2000, and used that $2000 to pay for virtual hosting expenses ( right now the corporate back end I am developing runs on 14 virtual machines hosted by Linode, and they add up to roughy $200/month).

There's a place on the Schedule-C for inventory. Without advice, what I concocted was that I loaned the c-corp a dollar, and then the c-corp ibought 20 baskets from myself for a dollar, and sold them for the 2k. But what about the other 50. Should I sell all of them to the corporation, list them as end of the year inventory? And what about the beginning of the year inventory? I owned them personally but hadn't used any for business yet. I'm not in the business of selling stainless baskets; but they are helping offset the cost of operation during startup. How do I document that? And they take up at least 60sq.ft. of my mother's garage, 6 miles away--business use of someone else's home; so I need the extra 8829 form cause it's a second property... it starts to get pretty complicated pretty quickly. Hope these professionals respond.
Any particular reason why you set yourself up as a C-corp rather than an S-corp?
 
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slac.in.the.box

Guest
Which is why you need to hire a tax pro for your business instead of fishing for tips on the internet.
I am trying to hire a tax pro; I live in an extremely rural part of Oregon--closest town is 45 minutes away, and it has a gas station, a post office, a mechanic, and a diner--but no tax professionals. So I've been letting my fingers do the walking, and so far, I've struck out on tax gurus; but I am still trying.

However, I've crowdsourced brainfuls of linux knowledge by fishing for tips on the internet--extremely complicated technical programming knowledge--so I think it could also be possible to glean extremely technical tax knowledge one fish at a time. There are knowledgeable tax attorneys and consultants on this forum; but it probably behooves their industry to recommend seeking advice. But, even one question at a time--and this one has stumped you all so far--eventually I'll have enough tips to fill out the 1120 correctly, file department of revenue reports, keep current with registrations and fees, etc. Yes it is complicated. But nothing is too complicated for a determined mind.
 

quincy

Senior Member
You can check back to see if Taxing Matters can assist in any way. The forum members are limited by terms of service to providing only general information, however, so specific legal advice must be found in your area.
 
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slac.in.the.box

Guest
In my other thread, I've been informed: "the questions you ask in it probably exceed the scope of what this forum can offer. The forum can offer general information and advice but specifics must be handled by an attorney licensed to practice in your own jurisdiction." So I understand if nobody responds explicitly. Nevertheless it doesn't hurt to cast a few flies: one fish at a time :) Thanks for everyone's helpfulness.
 

Taxing Matters

Overtaxed Member
There's a place on the Schedule-C for inventory. Without advice, what I concocted was that I loaned the c-corp a dollar, and then the c-corp ibought 20 baskets from myself for a dollar, and sold them for the 2k.
Not if the corporation isn't the one who actually sold them. So was the seller you or the corporation? If the seller was the corporation, then the treatment here will be different than you described above as you don't have a legitimate loan arrangement with the corporation. Moreover, you don't need to use that scheme to achieve the same result. If you were the seller and not the corporation then see my following comments on that.

These baskets you've held since 2007. So my guess is that you were not holding these things for inventory to use or sell in the course of a trade or business. If they were held simply for investment or collector's items then they are not inventory.

If you personally own them and they are not inventory, then the best thing for you to do is sell them yourself and figure out the long term capital gain on them and pay the tax on that. The tax on long term capital gains generally will cost you less than what the corporation pays on the sales because C-corps don't get lower capital gains tax rates. Then you can contribute the cash you get to the corporation. That cash contribution is not a taxable event since you are the sole owner of the corporation, and you'd increase your basis in the stock of the corporation by the amount of cash contributed.


And they take up at least 60sq.ft. of my mother's garage, 6 miles away--business use of someone else's home; so I need the extra 8829 form cause it's a second property... it starts to get pretty complicated pretty quickly. Hope these professionals respond.
I gather your mother's home is not your residence and you don't own the property. As a result, Form 8829 is not appropriate for this. Do you pay your mother rent for the storage of these items? If the answer is no then there is no tax impact here for the storage of the baskets.
 

LdiJ

Senior Member
In my other thread, I've been informed: "the questions you ask in it probably exceed the scope of what this forum can offer. The forum can offer general information and advice but specifics must be handled by an attorney licensed to practice in your own jurisdiction." So I understand if nobody responds explicitly. Nevertheless it doesn't hurt to cast a few flies: one fish at a time :) Thanks for everyone's helpfulness.
You really do need a tax professional to handle your taxes. I was a professional for at least 10 years before I took graduate classes on corporations and partnership and started handling those kinds of returns. If you really cannot reasonably hire a tax professional because you live in too rural an area then you should consider googling for some continuing education classes in corporate taxation and consider taking one of those online.
 
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slac.in.the.box

Guest
You really do need a tax professional to handle your taxes. I was a professional for at least 10 years before I took graduate classes on corporations and partnership and started handling those kinds of returns. If you really cannot reasonably hire a tax professional because you live in too rural an area then you should consider googling for some continuing education classes in corporate taxation and consider taking one of those online.
I reached out to an additional 5 law firms today. And, my mother, a retired PhD., who wants to help, has been taking some business courses at a community college 90 minutes away... they must be helping, because she told me yesterday the same thing as Taxing Matters: that the garage space wouldn't count, because I had not been renting it from her.

In 1998 I scored in the top quarter when taking the LSAT. But I decided I would create a database for any notes I would take at law school; then I decided I would figure out how to protect the database from the Russians. Now it's been 20 years, and I have the database, and I can protect it. If another week goes by with no response, I'll matriculate a school of law because I am an obstinate do-it-yourself type, and could get another degree faster than lawyers can check responses to their contact forms.

Quincy has mentioned that I would get better results by phone. IMHO, having a phone is not a legal requirement. It's amazing how many contact forms have phone number as a required field, for something not required by law.

I haven't had a real phone since 1999 and it feels great. Of course, I have toll free numbers and pbxs and software phones I can use when I need them--but I don't like being forced to use a phone. What if I forgot what they said? With an email, I can just go back and read it again. With a phone, I record the calls. The pbx tells my callers that they will be recorded when they dial my extension. That could be why none of my friends ever call :)

Thanks again for the advice. I reckon one of these professionals will eventually answer, and I'll be saved from law school.

--cheers
 
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slac.in.the.box

Guest
One of the lawyers responded: "Thanks for the inquiry. I don’t think this would be a good fit."

Here was the message I sent to his contact form:

"I seek legal tax advice for foundation of c-corp. I live in rural Lane County, beyond reach of cellphones, and I seldom travel. Therefore I seek a lawyer who doesn't need me in his or her office to provide legal advice--in fact, the bylaws I try to abide by discourage use of fossil fuels or petrochemicals anytime affordable alternatives are available; I would gladly pay full face-to-face price for a virtual consultation.

Sincerely,
Me, director
My company
My email...
 
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slac.in.the.box

Guest
Suddenly there's this Business Attorney in PDX (Portland is 4 hours away, so I haven't emailed anyone there yet) advertisement in this thread... I'm gonna try it.
 

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