C Corporation Controlled Group Status


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oughyougWe 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.”

Here’s why:

“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 .



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