Can one S Corp transfer expenses to another?
I recently met with my accountant and he told me that an S Corp can buy unused expenses from another S Corp.
I have a relative who has accumulated over $300,000 of expenses over the past 10 years that he has never written off or used. He has receipts for all these expenses linked to his S Corp.
My accountant says I can buy these expenses and put them against my income. For example, if I made $120k I can take $80k of expenses against it and show a profit of $40k. I will only pay taxes on the $40k. He says I could buy $80k of expenses from my relative’s S Corp for only $1 and transfer them to my s Corp. He says this is allowed by making a note.
For me, this sounds amazing because I can literally choose how much income I want to be taxed. My relative is willing to give me the expenses I need.
This accountant of mine has a lot of experience and is in his 80s. He deals with a lot of S Corps and has many high net worth clients. One thing that worries me is that all the other accountants I talk to say that they don’t think it will work. They say they have never heard of someone doing this. They say I can combine corporations instead.
Does anyone have any thoughts on this? I trust my accountant and I would like to believe he knows what he is doing.
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#2 Tax, SDIRAs & Cost Segregation Contributor
- CPA, CFP®, PFS
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This is not correct. He might be talking about NOLs from acquiring a C-Corp.
Quote from @Ashish Acharya:
This is not correct. He might be talking about NOLs from acquiring a C-Corp.
He told me by making a note, I can buy the expenses and transfer them to my S Corp. When he explains it in detail I get lost.
All I know is that my relative has $300k of expenses he hasn’t used and has accumulated over the years. Would this be considered net operating losses?
@Michael A. You cannot by suspended losses from an S Corp. why? Because they are suspended at the personal level and not S Corp level. Ask your account for the “Reg Section” or relevant literature.