C corporations are a type of corporation that’s taxed separately from the owners. Due to this, many questions are asked about C corporations regarding what they can or cannot hold. One of the main questions asked about this is that whether or not C corporations can hold real estate. The direct answer to this is that C corporations can indeed hold real estate. If an owner of a C corporation wants to hold real estate, it’s completely allowed. It’s also possible that when an owner of a C corporation dies and inherits to someone, that person can hold real estate in the corporation.
Should C corporations hold real estate?
While it’s completely possible for a C corporation to hold real estate, you may not want to do it as there are a lot that goes into it. What you need to consider as to whether or not you should hold real estate in a C corporation is the capital gains taxes, moving the property out of the corporation, and the asset protection.
Assuming your taxable income is less than the C corporation, there is a high chance that your capital gains tax rate is less. That said, when the property is sold for a profit, you may pay a higher capital gains tax rate than you would if you were to hold the property yourself.
You’ll also pay when transferring the property whereas it’s not taxable for LLCs and Limited Partnerships.
Other than the taxes, asset protection is a major consideration. Assume you’re sued and a judgment creditor takes control of the corporation’s assets. Through that, the credit can control the property as it’s held by the corporation, not you or another company. These all should be a concern when you hold a real estate in a C corporation.
If you’re secure and the real estate is used for business purposes without the intent of selling it in the future, holding the real estate under a C corporation may make sense, but mostly, not so much. It’s best to speak to a financial adviser about what works the best for you regards to holding real estate.