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Author: 51669 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121146  
Subject: nevada corporations Date: 9/18/2000 1:57 PM
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I am an investor for the long haul but recently I have picked a couple of stocks that increase substainaly in a short amount of time. Of course I did not sell any of the stocks because of the tax consequences. Right now the stocks are worth what I paid for them but i keep thinking that i should have sold them because it will be a very long time before they ever reach where they have been. Someone said that i should have my investments set up in a nevada corporation. I have no clue about this and i defiantely not interested in day trading. Can you clear this issue up for me? What really is a nevada corporation set up for?
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Author: RiverCityFool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 40065 of 121146
Subject: Re: nevada corporations Date: 9/18/2000 4:40 PM
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If you're running a business, there can be benefits to incorporating (shielding personal assets from lawsuits being one).

Nevada is one of the states in which it is fairly simple to incorporate, and there's no state corporate income tax.

If you're not running a business, I see no reason to incorporate.

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Author: RooCat Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 40094 of 121146
Subject: Re: nevada corporations Date: 9/19/2000 1:34 AM
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If you're not running a business, I see no reason to incorporate.

Actually, there is one good reason not to incorporate for investment purposes. That's because corporations do not get the benefit of long term capital gains tax rate as do individuals. All income in corporations is taxed at the corporation's marginal rate.

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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 40137 of 121146
Subject: Re: nevada corporations Date: 9/19/2000 8:04 PM
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<<Someone said that i should have my investments set up in a nevada corporation. I have no clue about this and i defiantely not interested in day trading. Can you clear this issue up for me? What really is a nevada corporation set up for?>>

As noted, if your investments are tied up in a corporation, you'll not receive the benefit of long term capital gain rates.

Additionally, the uninformed generally tout Nevada corporations in an effort to avoid taxes on the income to their state of residency. This simply doesn't work in most cases. Your state will expect tax from you on your worldwide income...Nevada or not. And not only that, if you're doing business in another state, that state may treat you as a "franchise" in that state, and still require you to pay corporation taxes to that state.

It's a lousy tax dodge, only good for those with larceny in their hearts and trying to beat the system outside the lines.

TMF Taxes
Roy

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Author: HatchetJack One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 40142 of 121146
Subject: Re: nevada corporations Date: 9/19/2000 8:27 PM
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I am an investor for the long haul but recently I have picked a couple of stocks that increase substantially in a short amount of time. Of course I did not sell any of the stocks because of the tax consequences. Right now the stocks are worth what I paid for them but i keep thinking that i should have sold them because it will be a very long time before they ever reach where they have been. Someone said that i should have my investments set up in a nevada corporation. I have no clue about this and i am definitely not interested in day trading. Can you clear this issue up for me? What really is a nevada corporation set up for?

______________________

The random advice seems to focus on state tax but ignores a nightmare on the federal side. Not only would the net investment income and capital gains be subject to corporate income tax but the structure almost certainly would meet the criteria for personal holding company status and therefore be subject to an additional 39.6% PHC tax on undistributed income. Such income if distributed of course would bring a slightly better result if you're not in the highest bracket. This is not a good idea.

HJ

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Author: RooCat Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 40161 of 121146
Subject: Re: nevada corporations Date: 9/20/2000 6:27 AM
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if you're doing business in another state, that state may treat you as a "franchise" in that state, and still require you to pay corporation taxes to that state.

Actually, it's a little worse than that. They normally treat you as a "foreign" corporation doing business within their state. (Foreign meaning not incorporated in that state.) Generally, the Corp. fees for a "foreign" corporation are more expensive and you must register in both states and sometimes there is a difference in taxing structure.

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