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This is an interesting situation, especially if you are a real estate broker with your own company or if your company owns the house in which you live. It is a plausible situation, and it probably happens often since most people who own companies reduce their tax obligation by purchasing a property through their businesses.

  • C Corporations

You might have to pay capital gains tax upon purchasing a property from your own business, but that would depend on the business structure. C corporations are not subjected to a preferential capital gains tax rate. This means that you will not be subjected to a capital gains tax if you purchase a house from your own business even if there is a profit from the sale.

The tax code requires C corporations to pay a 21% tax on all the income from their business operations. A 2018 amendment to the code requires sale of any of a company’s assets to any of its shareholders to be taxed if there is a slight profit from the sale. The law also requires such sales to match prices at which such sales would be made to a third party not affiliated to the corporation.

  • S Corporations

According to the current tax law, the sale of an asset such as a house to one of the shareholders of a corporation should be subject to long-term capital gains if the corporation owned the asset for over a year. S corporations are not subjected to income tax. Any loss or profit realized is shifted to the shareholder, which means that the shareholder is required to report the capital gain while filing their taxes.

  • Sole proprietorship

If you operate a business or company as a sole owner, you must report any capital gains if a house used for business purposes is shifted to your personal use. You are required to include the transfer in your tax returns. This is only required if the house was used for business purposes for more than one year.

  • Partnership or LLC with multiple owners

Partnerships operate like S corporations, and as such, most business proceedings are similar, including tax obligations. In other words, any loss or income realized through the sale of the house would be passed to the partner buying it, and they would be required to include it in their tax returns.