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I pay myself a salary to cover my living expenses; itbasically replaces the income from my old jobwhich I quit in order to flip houses full time. Any profits beyond my salary will be invested back into the corporation to grow the flipping business. Since this is all active income, the chances of the IRS disapproving are much less than if I were buying and holding. I have not heard about an additional 20% tax for passive income.
401k rollover to purchase rental property
early withdrawal penalties on the entire 401K. Finding an attorney or CPA to form the LLC under the C corp is proving to be challenging as most of them aren't familiar with the BORSA set up and don't want Nike Sweatshirts Kids
of managing a C corp vs. double taxation on FICA and Medicare, paying workers comp tax, and having to buy general liability insurance for lawsuit protection. I priced $1,000,000 per occurance GL insurance recently,and it will cost me almost $5,000 per year (based on rehabbing 10 houses per year). Keep in mind that under the BORSA arrangement, your new401K actually owns the C corp because it holds all the shares of stock, which seems to memore vulnerable to lawsutsthan operating asa LLC. So, I am investigating a way to form aLLC under the BORSA C corp to do business. As I understand it, you can't form a stand alone LLC and borrow funds from the C corp to do rehabs or it will count as a distribution/withdrawal of your 401K funds,and you will have to paythe incometax and Nike Joggers Suit Womens
to be held liable if a distribution event is triggered. That is exactly the type of info i'm looking for. I'm sure we are both dealingwith the same accounting firm. I had no idea coporate liability insurance would be so high. Hopefully, It will be a bit less for me asI plan to buy and hold a few as opposed to flipping. I just don't want to go through the trouble and expense of setting everything up only to find out that it is almost impossible to follow all of the guidlines. From my research, it seems like "discrimination" is the biggest hurdle for the true small business using the ROBS/BORSA, since they have to provide the same 401k options to all employees. luckily, I don't plan on having any employees. What are you doing with the proceeds from the flips? Are you collecting a salary, or reinvesting? Since you are flipping, youcan beactively involved, and therefore able topull a large salaryfrom the Corp. I have been told that the IRS frowns on upon aCorp wich mainly generates passive income paying ahigh percentage of the profit as a salary. and further, that passive income incursan additional 20%taxfor a corporation. What are you doing with the proceeds from the flips? Are you collecting a salary, or reinvesting? Since you are flipping, youcan beactively involved, and therefore able topull a large salaryfrom the Corp. I have been told that the IRS frowns on upon aCorp wich mainly generates passive income paying ahigh percentage of the profit as a salary. and further, that passive income incursan additional 20%taxfor a corporation. Any thoughts or experience?
I have a LLC that holds my rental properties that are in my name. Strictly passive income, and no issues with being classified as a dealer. If you flip and do buy and hold from the same entity you are asking for trouble.
I would like to hear feedback from anyone who has successfully used a Rollover as Business Startup (ROBS) Nike Jackets Men Red or a Business Owners Retirement Savings Account (BORSA) to use assets in a 401k to fund investment real estate purchases. Has it been a positive experience or overly cumbersome? I am aware of the potential to roll assets in to a self directed IRA, however that option doesn't appeal to me sinceIwouldn't be able touse the rent income until 59.5 (my goal is to resign from my current job and would like the income to replace my salary). It's too early to tell how reallycumbersome it is with regard to accounting, taxes, annual filing,etc., because I haven't worked through most ofit yet in practice, but it seems relatively straightforward. The main thing is to avoid triggering a "distribution" by following all the federal rules for maintaining and managing your new 401K. Still worth it of course, but the main drawback for me is the extra hassles Nike Sweatshirts White
Here is where the solo 401k pays off.
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I have a LLC that does my renovations and flips, and is the business that has my solo 401k attached. So that much of the profits that would be regular income is able to go into the 401k. I sub out all of the rehabs to this LLC from the holding company. The rehabs from the 401k can not be done by that LLC, but for me that is irrelevant since my brother's company can do them and he gets the profits and gives me good rates. What are you doing with the proceeds from the flips? Are you collecting a salary, or reinvesting? Since you are flipping, you can be actively involved, and therefore able to pull a large salary from the Corp. I have been told that the IRS frowns on upon a Corp wich mainly generates passive income paying a high percentage of the profit as a salary. and further, that passive income incurs an additional 20% tax for a corporation. Any thoughts or experience?
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