The Best Structure for Real Estate C Corp vs. LLC Explained

Anderson Business Advisors Podcast

In this Tax Tuesday episode, Anderson Advisors’ Barley Bowler, CPA, and Eliot Thomas, Esq., tackle ten listener questions covering essential tax strategies for business owners and real estate investors. They break down the enhanced contribution limits for solo 401(k)s, including the new employer Roth contributions and age-based catch-up provisions. The attorneys explain proper loan structures between shareholders and corporations, emphasizing documentation requirements and interest rate compliance. They cover installment payment reporting for private money loans, clarify the Augusta Rule (280A) for tax-free rental income from home meetings, and distinguish between deductible business expenses versus personal costs. Investment structuring strategies for AI and energy stocks are explored, along with C-corporation real estate ownership considerations. The episode concludes with discussions on the expanded SALT deduction limits, pass-through entity tax workarounds for high-tax states, and the new research and development tax benefits under recent legislation.

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Highlights/Topics:

• "What is the maximum that can be contributed to a solo 401k Roth as the employee and employer of my own business, what do I need to do to handle payroll for myself?" - Employee limits: $23,500 (under 50), $31,000 (50-59), $34,750 (60-63). Employer: 25% of compensation. Use professional payroll services.
• "I want to loan cash for my business to myself, since my spouse and I have regular W2 jobs that push our incomes into high, the highest tax brackets. Other than loaning money to myself to pay for rental property. Are there any other uses for those loan funds? What are the issues on the backend for repayment rights?" - Must have written documentation, regular payments, and applicable federal rate interest (4.22% for 2025).
• "I'm receiving installment payments on a private money loan from my borrower. Are these payments listed as income, even though the entire principal balance and interest haven't been paid yet? How do you show this on a tax return?" - Interest portion is taxable income as received. Principal repayment is not taxable. Report on Schedule B.
• "I have a C Corp and two LLCs. Can you clarify the tax allowance on Augusta meetings, please? Also known as 280A. I believe I was informed that I can deduct up to $1000 per month on these monthly meetings when held, is this still the case for 2024 and 2025?" - Fourteen days maximum per year regardless of entity count. Get three local quotes for reasonable rates.
• "Are the paid fees for business essentials and the Living Trust deductible as startup costs or operating costs?" - Business essentials are deductible (startup vs operating depends on timing). Living trust is personal expense, not deductible.
• “What strategies should I set to invest in AI or energy stocks?" - Wyoming LLC for passive investing. Trading partnership with C-corp for active trading and tax benefits.
• "A C corporation owns a disregarded LLC, which in turn owns real estate. The real estate is sold for capital gains that is incurred by the C Corp. Is this the best way to be structured?" - Never put appreciable real estate in C-corp unless flipping. For buy-and-hold, use Wyoming holding company structure.
• "Does the SALT (state and local tax) deduction of $40,000 apply to a joint tax return?" - Yes, $40,000 limit applies to joint returns. Phases out at $500,000 AGI but maintains $10,000 floor.
• "How does the new PTET (pass through entity tax) SALT (state and local tax) deduction work around policy work for high tax states like California? Are certain entities included like SSTBs (specialized service trader businesses)?" - Pass-through entities can pay state tax for federal deduction. Complex structures and publicly traded partnerships excluded.
• "How might the research and development (R&D) tax credit that's been affected by the big beautiful bill help me as a small business owner?" - Domestic R&D expenses can be deducted immediately (100%) or over five years. Foreign expenses still 15 years.

Resources:

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