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Posted by Harlan Lunsford on February 17, 2008, 1:57 pm
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Gil Faver wrote:
>
> wouldn't that start you down the slippery slope of "piercing the corporate
> (or LLC) veil"?
>
> The LLC is a separate LEGAL entity. I would have the LLC rent the building
> legit, and put the rental income on schedule E and the rental expense on
> schedule C. Why would that not be permitted?
>
"Piercing the corporate veil" is a term used when trying to do things
within a corporation instead of proper place, individually. Quite the
reverse of this case.
Correct, the LLC is separate, but disregarded for tax purposes, and that
is what we're talking about here.
ChEAr$,
Harlan Lunsford, EA n LA
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Posted by Paul Thomas, CPA on February 17, 2008, 2:59 pm
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> Gil Faver wrote:
>
>>
>> wouldn't that start you down the slippery slope of "piercing the
>> corporate (or LLC) veil"?
>>
>> The LLC is a separate LEGAL entity. I would have the LLC rent the
>> building legit, and put the rental income on schedule E and the rental
>> expense on schedule C. Why would that not be permitted?
> "Piercing the corporate veil" is a term used when trying to do things
> within a corporation instead of proper place, individually. Quite the
> reverse of this case.
>
> Correct, the LLC is separate, but disregarded for tax purposes, and that
> is what we're talking about here.
Disregarded for tax purposes - but it IS a separate legal entity by state
law.
As such I would have a rental contract in place between the LLC and the
property owner. Specifically because the LLC is not the owner of the
building.
Perhaps the OP is married (no info there) and can have the spouse own the
building, which solves the problem.
--
Paul A. Thomas, CPA
Athens, Georgia
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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Posted by Gil Faver on February 18, 2008, 6:13 pm
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>
>> Gil Faver wrote:
>>
>>>
>>> wouldn't that start you down the slippery slope of "piercing the
>>> corporate (or LLC) veil"?
>>>
>>> The LLC is a separate LEGAL entity. I would have the LLC rent the
>>> building legit, and put the rental income on schedule E and the rental
>>> expense on schedule C. Why would that not be permitted?
>> "Piercing the corporate veil" is a term used when trying to do things
>> within a corporation instead of proper place, individually. Quite the
>> reverse of this case.
>>
>> Correct, the LLC is separate, but disregarded for tax purposes, and that
>> is what we're talking about here.
>
> Disregarded for tax purposes - but it IS a separate legal entity by state
> law.
>
>
>
> As such I would have a rental contract in place between the LLC and the
> property owner. Specifically because the LLC is not the owner of the
> building.
absolutely. This is essential. Here is an example of the attorney who
advises a client to keep matters separate being circumfented by a tax
preparer who is only concerning himself with filling out a tax form, and
making his life as easy as possible. Here starts the slippery slope, with
the taxpayer getting advise NOT to keep things separate, so what will the
taxpayer do next, as an expediant . . .
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Gil Faver on February 17, 2008, 5:11 pm
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> Gil Faver wrote:
>
>>
>> wouldn't that start you down the slippery slope of "piercing the
>> corporate (or LLC) veil"?
>>
>> The LLC is a separate LEGAL entity. I would have the LLC rent the
>> building legit, and put the rental income on schedule E and the rental
>> expense on schedule C. Why would that not be permitted?
> "Piercing the corporate veil" is a term used when trying to do things
> within a corporation instead of proper place, individually. Quite the
> reverse of this case.
>
> Correct, the LLC is separate, but disregarded for tax purposes, and that
> is what we're talking about here.
I believe that you can pierece the corporate veil by either doing things
outside the corporation that should be done inside the corporation, or vice
versa.
While I understand that the LLC is disregarded for tax purposes, I think it
best to keep in mind state law concepts when doing taxes, and finding the
sweet spot.
It would appear that if you put finances pertaining to a personal
asset/business together with finances pertaing to an LLC asset/business on
the same IRS form, you are running the risk of someone saying you are not
treating these two separate legal matters properly. I would not run that
risk. I still see no reason not to include the rental property on Schedule
E and the business on Schedule C, and making sure you are following all
applicable IRC and IRS provisions.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by removeps-groups@yahoo.com on February 17, 2008, 6:10 pm
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> "Piercing the corporate veil" is a term used when trying to do things
> within a corporation instead of proper place, individually. Quite the
> reverse of this case.
What if the LLC is sued and has to sell its assets to make payment.
If it just uses the building, then perhaps the lawyer can construe
that as the LLC owns the building (which is why it doesn't have to pay
rent). So then it means that the building could be lost in a
lawsuit. However, if there is a rental contract, them the building is
protected. I'm no lawyer, so could be way off here.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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