Posted by Jimmy on May 26, 2008 at 05:17:38:
In Reply to: Re: You do NOT want to buy the stock posted by Penny on May 25, 2008 at 09:59:30:
thanks for the kind words. I am a very direct person, both in person and when typing. and sometimes I rub people the wrong way. as Popeye would say: "I yam what I yam"
yes. one of my clients found himself with a $5,000,000 South San Francisco warehouse, with zero basis. why? he bought the stock from the prior owner 20 years prior. he did not think about the tax consequences. and he did not envision that the property would go up 10x. and his attorney was NOT a tax lawyer or even slightly tax-wise. and he did not get his CPA involved in the acquisition (he should have. the CPA is very bright, and would have smelled this skunk a mile away).
another client was in this situation. but his error was different. he set up his business as a C corp for good and valid reasons. in particular, it allowed him to implement some executive comp and employee benefit plans not available with other forms of ownership. initially, the corp leased the property from which it operated. later, the owner approached client and offered to sell it to him. so they cut a deal. client did not get tax advice before doing so. it would have been easy to structure the acq so that HE was the buyer. and it would make no difference to the seller. this was an unforced error.
but let's put these in perspective. both pieces of real estate appreciated more than tenfold over the client's holding period. so I'm not shedding tears for them. but a few thousand dollars for tax counsel before they transacted these deals would have saved them millions down the road.