Tax Guru – Ker$tetter Letter

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Archive for October 29th, 2006

Get professional assistance for corporations

Posted by taxguru on October 29, 2006



Subject: Question about s-corp vs c-corp

I have a simple question regarding a s-corp vs. c-corp. I am partners with two other investors in commercial real estate that we rent. Currently we are an s-corp. The property is showing a profit of over $250,000 per year so each partner is reporting $83,333 income. We are not taking any money out and are not planning to for 5 years. We want to expand the business in the future so that is why we don’t take any profits. As you know we are getting hammered on taxes. We all have other jobs to provide income to live on so we don’t need the money right now. After 5 years or so we might sell out. My questions are:

1. Would a c-corp be to our advantage?
2. Should we switch back to an s-corp in the future?
3. Can we switch to a c-corp this year to cover any profits for 2006?

Can you give me any other suggestions or places to look for information about this subject?


There are far too many options to consider and possible scenarios that can be used to achieve your goals for me to even begin giving you specific advice via this medium.

You will need to work directly with an experienced tax pro who can analyze your unique circumstances. I wish I could help; but I already have too many clients to take care of properly; so we are still trimming back on the difficult clients and are not accepting any new ones at this time. 

Unfortunately, we don’t have anyone specific to whom we could refer you. I did recently post some names and links for some like-minded tax pros around the country.

If you haven’t already done so, you should check out my tips on how to select the right tax preparer for you at. 

One aspect to your situation on which I can advise is for you to stop thinking of an all or nothing approach.  You don’t need to limit yourselves to one single corporation to run your business projects.  There are many benefits to using multiple entities for tax saving as well as liability protection reasons.  A good tax advisor should be able to explain how these would work for your unique circumstances.

I wish I could be of more assistance; and I wish you the best of luck.  

Kerry Kerstetter




Posted in Uncategorized | Comments Off on Get professional assistance for corporations

IRAs Investing In Real Estate

Posted by taxguru on October 29, 2006


From a reader:

Subject: A small favor
Mr. Kerstetter,
Kerry, please take a moment and review the content of our website: I would be interested in knowing if you were familiar with these types of investments? If any synergies exist that we should discuss? And, if there would be any interest among your associates and Tax Guru Blog readers in knowing more?
Thank you in advance,
Steven Berman
Principal and Realtor


My Reply:


Thanks for passing along that link.  As you may know if you have read any of my writings, I am a huge believer in real estate investments as the most reliable method to accumulate wealth, including in retirement accounts.  Unfortunately, most retirement plan custodians have a very limited range of investment vehicles, consisting mostly of stocks and CDs.  I have noticed a recent trend offering REITs, TICs and other fractional interests in real estate, of which I am not a big fan.  Owning and controlling property directly, so as not to be at the mercy of unknown and often unaccountable folks, is the safest way.

I checked your website and like that you cover a lot of tax efficient ways of owning real estate.  I am  a little confused in regard to your logistics of working with retirement accounts.  Do you act as retirement account custodians to handle the ownership for people or do you have a prototype master plan that they can use with their own personal financial advisors? 

I am interested in learning more about your services because I have constantly heard from frustrated clients and readers who want to use their retirement accounts for real estate investments but can’t find plans that will accommodate that.

Thanks for any additional info you can provide.

Kerry Kerstetter



Please call me on my cell phone when you have a few minutes during the day… I will happily explain our services to you.



I Replied:


I was hoping for some links to textual material that I can post on my blog and website about using IRA accounts to invest in real estate.  Do you have anything written up on that, especially a list of custodians who can handle such self directed accounts?

Thanks for any info you can provide.

Kerry Kerstetter

From Steve:


No problem, actually that list and their links are on the Resources page of our website

I would still like to take around ten minutes to discuss things with you at a 30,000 foot level. As you know we are the ones that bring the transaction together. In that role we act as a “general contractor” linking out clients to self-directed custodians, non-recourse mortgage lenders, even to accountants and attorneys and other consultants, if need be.  We have found it essential that we help provide any other resources they may require.

Ninety percent of the time we are buyers agents, but will act as selling agent for select clients. None-the-less, we are fiduciary to our clients (i.e., buyers) but are paid by the property sellers through a traditional real estate commission arrangement, nationwide.

Steve Berman





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