– Businesses that are formed as C corporations treat real estate assets as they do equipment and inventory, with expenses related to owning the assets appearing as ordinary expenses on their income statements and generally being tax deductible.
– Transferring ownership of real estate to a pass-through entity can avoid double taxation, as profits upon sale would be taxed only at the individual level.
– Separating business ownership from its real estate can protect it from creditors and other claimants, as plaintiffs can’t touch property owned by another entity.
– If a business is forced to file for bankruptcy, creditors generally can’t recover real estate owned separately unless it’s been pledged as collateral for credit taken out by the business.
– Separating real estate from a business may provide estate planning options, such as bequeathing the business to one heir and the real estate to another family member who doesn’t work in the business. – The business owner could purchase the real estate from the business and hold title in his or her name, but this could lead to the owner being responsible for any liabilities related to the property.
– An alternative is to transfer the property to a separate legal entity, such as a limited liability company (LLC) or limited liability partnership (LLP), in order to protect the business from liabilities related to the property.
– Setting up an LLC is a more commonly used method for transferring real estate, as it is simple to set up and requires only one member. However, LLPs require at least two partners and are not permitted in every state. – The standard deduction for single and married filing separately will increase to $12,550 for 2021.
– The IRS expanded the Earned Income Tax Credit (EITC) for childless workers for the 2021 tax year.
– The maximum income limit for the EITC has increased to $21,430 for single filers with no children.
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