We ran out of time during our free webinar “Your After Election Tax Plan” and couldn’t get to all of our questions. During the call, we talked about how having a C Corporation can solve a lot of the fiscal cliff problems coming 1/1/13. All of the bad tax laws are geared just toward individuals and flow-through entities. There are no tax increases, tax deduction loss or new taxes for C Corporations.
The first $50,000 of income for a C Corp is taxed at just 15%. So it’s tempting to have multiple C Corps to keep your income low.
The IRS is on to that one. They won’t let you do it because it’s considered a controlled group status.
One of the questions we got was:
“Would different LLCs owning different C Corps sidestep the control group issue?”
The short answer is “no.”
“A controlled group can be a parent-subsidiary group or a brother-sister group. A parent-subsidiary group is where at least 80% of the voting power or value of stock of each corporation in the group (other than the common parent) is owned by one or more corporations in the group. A brother-sister group exists when 5 or fewer persons own at least 80% of the voting stock or value of stock of each corporation’s stock in the group, and 5 or fewer individuals own at least 50% identical interests in each corporation (i.e., the lowest common denominator of ownership is used in each corporation).”
In this case,you would have a brother-sister group and that means you have a controlled group issue for the corporation.
For more information on C Corporation, please go to http://www.CCorporationTax.com .