Q:

Subject: Question regarding C corp Taxation...

Hi Mr. Kerstetter,

I love your website and appreciate your frank opinion on all topics. I am a CSU Hayward grad as well, Year 2001. I wanted understand more about tax benefits on C corps, I am starting a business franchising Pizza from PapaJohn's in the east bay area. My family also owns a farming operation of Almonds. I have created 2 corporations and will be handling the books for both. Couple of questions that come to mind are:

- If I do not distribute any profits from any of the corporations, do I still have to pay taxes?
- Can I use the un-distributed income from a corporation towards buying more land and not pay any taxes on that income?
- If i show a loss on my corporation, is that perfectly ok and there is no limit to number of years I can do that for?
- Finally, I have read on 179 but still not very clear that what can I write off? Can you give me specific examples of types of writeoffs people do?
- If I buy a vehicle for pizza business and use that heavily what are my write-offs on that?

I hope you can answer these questions, I have been long searching for answers and validation on these but never found a straight answer.

Final question is about, if we had to hire you a s tax advisor and accountant for filling our taxes, what would that cost us?

Thanks

A:

You do really need to be working with a tax pro who can assist you with these kinds of things.  I wish we could help you; but we already have too many clients to take care of; so we are not accepting any new ones at this time. In fact, we are actually still cutting back on clients, trying to find the right balance of workload, so that I'm not so backlogged with projects.  I have no idea how long that will take.

Unfortunately, we don't have anyone else to whom we could refer you. If you haven't already done so, you should check out my tips on how to select the right tax preparer for you.

Your questions here are all extremely basic.  So, for the benefit of my readers, I will cover them briefly.

Distributing corp profits - With an S corp, there is no difference whether the profits are paid out to the shareholders or not.  With a C corp, if you don't bleed out the profits by making deductible payments, the tax rate can get pretty expensive at the corporate level.

Buying land won't do anything to reduce the corp's taxable income.

Corporate net operating losses can currently be carried forward up to 20 years.  This rule is changed occasionally by our rulers in DC.

I have a ton of info on Section 179 on my website.

How to handle vehicle expenses depends on who owns the vehicle (you personally or the corp), as well as the percentage of miles driven for business versus personal.  Any competent tax pro should be able to give you more specifics for your situation.  

Good luck.

Kerry Kerstetter

 

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 7/31/2005 02:04:00 PM Send this post: