one more housing/corporation question

I've only practiced law for about 20 years and not in RD. I think we all know right from wrong and if your gut tells you its wrong, then its wrong. Then again, there are those people without guts. They can't the difference between right from wrong. The foregoing should answer your question.

There would be a tax due if you had your own property in a corp and wanted to transfer it into another corp.

I already asked that question!

As long as the amount of capitalization in the company which held title to the property was sufficient to cover the current valuation of the improvements on the property don't you just end up buying a majority interest in the corporation? I didn't believe that that constituted a transfer of title under the law (at least not at the time we signed our contract) so no tax would be due. OTOH if the property is an an individual's name originally I don't see how you could avoid actually paying a tax. The title would have to be transferred to the new owner.

I have no idea what you just said.

Well, I was a politician for a while ...

Transferring owenership of a company that owns property by buying shares in that company does not, at this time, constitute a change of ownership of the property. That is, the same company still owns it. Despite the change of the president of the comapny from someone else, to you.

What I meant about capitalization was just that the company needs to have been set up to be able to sell enough shares of stock, at a total value sufficient to be greater than the value of the land and property, or you will have some problems.

If a company owns a piece of property and you buy the company there is no tax due from selling the company had it been in the name of an individual. That has already been discussed and is a popular loophole around taxes on purchase and sale.

Capitalization of the Company is for yearly corp tax purposes and should be started/funded with a higher capital value than the real estate. That was not his question as I read it though. He wanted to talk the person that owned it into putting it into a corp first and then selling it to him so HE could avoid tax on the sale.

I had posted previous that if you change the ownership from one company that you own to another there are taxes due.

Scott

Right on all counts ...

Escott, you had the benefit of a few more hours sleep before you composed your reply! Everything you said is absolutely correct as far as my lawyers and real-estate agents explained it to me here.

If the house is in someone's name only, and he basically 'sells' it to a corporation, even if he is the majority stock-holder in the purchasing corporation, I would certainly think taxes would be due. At which point he would have to negotiate with himself as to whether he was going to pay the tax or if instead he would have to pay it.

:: smile ::

The distinction to keep in mind is that while real estate purchases are subject to transfer taxes, purchases of stock in a company are not. A special law also exempts ?contributions in kind? of real estate into a company from transfer taxes. Therefore, when the seller ?contributes? his property in kind to a corporation, gets back stock for his contribution in kind and then sells the stock to the buyer, transfer taxes are avoided.

This does not mean, however, that the transaction is absolutely tax-free since other taxes (income taxes or capital gains taxes) may apply. An example: an individual buys a property for RD$50,000 pesos in 1993 (actually it was US$50,000 but he/she cheated, as most buyers did at the time, and ordered his attorney to put the low amount in the deed of sale). In 2003, he contributes the property in kind to a company and subsequently sells the stock to the buyer. Nowadays, in most places, sales and contributions in kind are subject to review by the tax authorities as to their value. Assuming the property is now worth the same US$50,000, the seller will be liable to pay a 25% tax on his/her capital gains, which will be calculated taking into account a purchase price of RD$50,000 pesos (US$50,000 - RD$50,000) .