Tax ideas anyone? $600,000 payday on the horizon - Posted by Steve

Posted by Bill Jacobsen on October 30, 2008 at 10:10:45:

First of all, these are questions you should be asking your accountant. In fact, you went into this venture to make money so should have been talking to your accountant prior to starting.

How you are taxed depends on the form of the entity your business is in. Most likely you have a C-corp or S-corp. It may be relevent to know how your business was funded. Was it a loan from you?

Does your business have a qualified retirement plan? Are you paid a salary? Yes you can contribute to various deferred plans but there are limits on the contributions.

If you sell a unit to yourself you will have to sell it at market value. It should be comparable to what you sold the other units for unless the market has changed since the original contracts were signed.

One clarification. You have business income, not investment income. In some cases that will make a difference.

After all my rantings, the advice is to seek a competent CPA.

Good Luck,


Tax ideas anyone? $600,000 payday on the horizon - Posted by Steve

Posted by Steve on October 27, 2008 at 21:10:37:

Hello, I’m looking for some tax ideas. I have a small development company and a real estate brokerage in Colorado. I am building a 3 custom townhomes with 2 of the 3 units under contract (very confident they will close). The 3rd unit will be my personal residence.

Some Numbers
$1,100,000 construction loan(i’m actually under budget…but am only at 50-60% completion)
$270,000 land (paid cash for this)
Contract 1
$615,000 may be getting an extra 20k from change orders
$635,000 has not changed anything yet

$1,250,000 is the total of the 2 sold units which pays back my construction loan and gives me the last unit for all intents and purposes free. My question for you guys is this; can i keep this unit for free (which is what i’d like to do) and get an equity line to finance my other developments? If I do this do you see any potential tax headaches for “buying” a unit from myself for $1

I plan on marketing this unit while living there. If this sells then i have a huge $500k profit. That sounds great but i’m worried about the tax on it. Do you know of any way i can structure this to avoid such a large gain?

A couple thoughts on the entity that owns this development.
Could i open a IRA or College account (I go to school part-time) and use this self directed investment vehicle to buy shares of the operating company then distribute a portion of the profits to these accounts? Am i way off base here, is there an easier way to do this…am i on to something? any advice would be great.


have roughly $400-500k in profit when these are all sold. I was planning on living in my unit for free but my accountant is saying that i could be taxed on this because i’m receiving