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Author: BeenFooled Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121566  
Subject: Re: Leaving money in S Cospr at end of year Date: 5/25/2010 3:47 PM
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Sorry. I had not seen the subsequent posts when I posted the above. No I don't have a tax person doing this for me - a few years back I did and it was too expensive (worked out to about $5k/year, which at the time was about 10% of my revenue.... would be a little less now I guess, but still a difficult cut to swallow!).

I am still not seeing why I would leave the cash in the corp if I paid taxes on it. This is how I think of it:

Same $10,000 left at end of year.

Scenario 1.
I get a $10,000 check with my Sch. K., pay $5,000 tax, final take home $5,000. (this is what I always do).

Scenario 2.
The $10,000 still counts as my income and I pay taxes on it, but this time as you suggest I leave the remaining $5,000 in the corp. Suppose next year nothing happens in the corp and at the end of the year I still have the $5,000. Doesn't that show up as the 'ending balance' of my checking account, and hence on my Sch. K, and hence I pay another round of taxes on it?

In the meantime, point taken about might have to amortize patent costs over a few years, I'll look into it. And foo1bar is right, I am trying to plan income (higher than normal this year due to patent sale) and expenses and taxes over this and next year to see if I can come out ahead. The basic problem is the bumper crop of cash this year from the sale - I wonder if I could somehow recognize THAT over a number of years, though I (patent guy rather than tax guy) don't see how.

Thanks for the discussion.
BF
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