[Search for users] [Overall Top Noters] [List of all Conferences] [Download this site]

Conference nyoss1::market_investing

Title:Market Investing
Moderator:2155::michaud
Created:Thu Jan 23 1992
Last Modified:Thu Jun 05 1997
Last Successful Update:Fri Jun 06 1997
Number of topics:1060
Total number of notes:10477

694.0. "A Trust or A S-Corporation?" by SOLVIT::CHEN () Wed Mar 09 1994 14:59

    I was asked this question and I don't quite know what the right answer
    should be. So, can someone who is knowledgeable about this subject
    please shed some light for me?
    
    A friend of mine is interested in investing in real estate. He wants to
    know what the advantages/disadvantages are for either forming a
    S-Corporation or a real estate trust. The goal here is to have the most
    tax advantage and the least liability. He will have partners in this
    investment. Which one is better?
    
    Thanks in advance!
    
    Mike                                       
T.RTitleUserPersonal
Name
DateLines
694.1CPDW::ROSCHWed Mar 09 1994 17:1825
    Subchapter S corporations - investors avoid double taxation and still
    retain limited liability. The number of investors in a Subchapter S
    corporation is limited by law. Subchapter S is one form of DPP. (Direct
    Participation Program) Units of ownership in a DPP are called
    interests.
    The DPP investor enjoys certain advantages:
    	The investment is managed by others
    	Flow-through of income and expenses
    	Limited liability
    DPP's have certain disadvantages:
    	Lack of liquidity
    	Difficult, though not impossible, to change the GP. The GP is not
    		subject to an annual election.
    	Conflicts of interest by the GP - (ex: Building an apartment
    	complex next to partnership property and renting her own unit's first)
    	Improper use of partnership assets.

    REIT's manage a portfolio of real estate investments. Shares can be
    traded publicly. Under the guidelines of Subchapter M of the IRC, a
    REIT can avoid being taxed as a corporation by receiving 75% or more
    of it's income from real estate and distributing 95% or more of it's
    taxable income to the shareholders.

    Because of the 1986 tax law changes REITs became more popular than
    DPPs.
694.2SOLVIT::CHENWed Mar 09 1994 18:015
    re: .1
    
    That was great information. Thank you very much!
    
    Mike