Tax implications on repaying business investment money

[Clint Moore]

My question is what concerns do I have if I repay myself the money I invested in my S corp or can be LLC. My plan is to put money in my already established S corp or start LLC. Buy a home cash sell it to myself on contract, streamlining the BRRRR strategy, for cash out refi. My question is if I need the initial investment money back what tax implications or other issues might arise from repaying myself. The only reason I say LLC is because current biz is an S corp but not opposed to starting an LLC just to accomplish my goal easier.

[Ashish Acharya]

@Clint Moore , 

What are you doing with S-corp right now?

Do you plan to or already conducting Rentals via S-corp? Usually, people elect S-crop to save Self-Employment taxes, but Rentals are not taxed as self-employment income to begin with. So S-corp was not necessary. The biggest disadvantage of S-corp is when you want to transfer an asset in or out of the S-crop. 

Unlike LLCs, in which you can generally distribute property without tax implications, Property distributed via S-corp is treated as if sold to a shareholder for its fair market value. Gain is recognized by Corp and passed to you and you can never recognize a loss  ( unless liquidating distribution) 

Also, you do not need to transfer the asset to yourself for BRRRR. You can BRRRR within the entity (you will have to gurrantee the loan)

Also, very simply stated, you can distribute the cash out of the S-corp or LLC tax-free if you dont go over your basis. The topic regarding "Basis" gets complicated really fast so I will leave it out. Bottom line is you can distribute money out of entity tax-free, usually.

So when you cash refi within the entity, you will have enough basis because of your refi loan to distribute the cash out of the entity without triggering tax if structured properly. 

With what you are trying to do, looks like it is worth talking to you CPA. Good luck