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Updated over 12 years ago,
Help regarding upstreaming of income?
I am yet to make my first investment- but have been doing my homework and saving, and I'm "almost ready". I work in a secure, full-time employed position, and I love my job. To be clear, I do Not intend to quit anytime soon to run into the real estate investment world. That said, my benefits at work are restricted to what my employer provides.
I learned about defined benefits plans, and how I can create this benefit under certain corporate entities. Then I learned a bit about upstreaming between entities, which, on paper, sounds like a good tax-saving idea. I'm having a much harder time trying to model the tax savings under my circumstance.
Specifically, I don't see how this scenario could work when the bulk of my income still comes from my employment rather than my investments. My job-earned income funds the purchase of assets that are held in a corporation. I've already paid income tax on all the money I'd use to fund any corporate spending (it's all my earned income from my job), so it seems like the second entity is redundant. I'd be upstreaming just to get a write-off to avoid being double taxed on transactions that are passed through an unnecessary second corporate entity. The whole situation would be avoided if I simply had one corporation that owned the investment property and provided a defined benefit plan for it's executive board, wouldn't it?
Can anyone explain to me how upstreaming works in the "real world"? I'm sure there's a way to optimize that flow for non-self-employed people, but I just can't see it yet.
Thanks,
Doug