Posted by: Xenia Merton ®
01/05/2003, 21:27:19
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I have a few questions about Red Inc/Warbucks. 1) I assume the Nevada corporation is a C corp. Passthrough entities, unless I'm mistaken, cannot avoid state taxes owed by their shareholders/members.
2) Since you are both majority shareholder and director of the Nevada corp, how do you avoid your home state characterizing its income as local in order to tax it?
3) Some of the businesses, like the Home Mortgage Corp/Warbucks Mortgage Corp, produce interest or other types of income that the IRS will heavily tax as Personal Holding Company income. How do you avoid this ignominious fate?
4) How do you avoid IRS recharacterization of the two corps as one for tax purposes? The IRS doesn't like to let corporations with common ownership keep separate tax brackets if they do business with one another.
5) California is one of the most aggressive states in its efforts to limit or destroy Warbucks strategies. What are its rules in Warbucks situations, and how do you avoid them?
6) Some of the Warbucks articles refer to "profit centers", like loan servicing contracts, which look to me like they are not additional profits but simple income shifting between entities.
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