What are some common or good end of year purchases a company can make to lower taxable income on the K-1?

LLS filing as an S-corp. Cash accounting method

Possibly $1M in net income

Trying to understand how to not get killed individually on taxes

Any recommendations? IE open a safe harbor account, buy some land, take distributions, stock inventory, etc???

That depends on what your hobbies are.

chn4 said:

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What are some common or good end of year purchases a company can make to lower taxable income on the K-1?

LLS filing as an S-corp. Cash accounting method

Possibly $1M in net income

Trying to understand how to not get killed individually on taxes

Any recommendations? IE open a safe harbor account, buy some land, take distributions, stock inventory, etc???

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Buying land does not lower taxable income, taking distributions does not lower taxable income, and stocking inventory does not lower taxable income.

As someone mentioned, buying depreciable assets will, but that makes sense only if they are things you need. Retirement plans are worth looking into as long as they fit with your comfort zone as to who all must be covered under the plan.

Skid steers seem to be a pretty popular purchase the last week of December.

Here's a few options to help with tax liability:

Oil and Gas investments - some offer 50-80% tax deduction of the capital invested.

Charitable Donations - some offer up to a 5-1 ratio of tax deduction to amount donated.

Solar Tax Credits - purchase appreciating solar assets using and LLC that are installed on other peoples homes. This one requires 100 participation hours and probably not feasible this late in the year. You can invest up to 75% of your total tax liability.

What kind of business are you in?

I assume the worst thing to do is to just leave the money in the bank (not do anything) and then get railed on your individual taxes....this could create a scenario where a member of the LLC does not have the individual funds to pay income taxes from their K-1?

Wouldn't the easiest solution just to pay out enough of a distribution to each members to cover their additional tax burden generated from the K-1 company profits and still have some extra Christmas money left over?

I dont get how donating to a charity is a good solution other than the obvious good human deed aspect. If making $ is the goal, wouldnt a member rather pay himself through a distribution (understanding he will be taxed on it) rather than just giving money away to lower taxes (IE not paying himself at all)?

Water and wastewater equipment sales

I try to frame it this way...

Spending 100k will save me 20k in tax - I am still out 80k. So unless it is something I NEED, it doesn't make sense to buy to save taxes.

Another way to think about it - if I buy that 100k tractor, I'll save 20k in taxes. So basically I paid 80k for the tractor (20% discount).

Start spending money by buying a star and you may get some good advice.

chn4 said:

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I assume the worst thing to do is to just leave the money in the bank (not do anything) and then get railed on your individual taxes....this could create a scenario where a member of the LLC does not have the individual funds to pay income taxes from their K-1?

Wouldn't the easiest solution just to pay out enough of a distribution to each members to cover their additional tax burden generated from the K-1 company profits and still have some extra Christmas money left over?

I dont get how donating to a charity is a good solution other than the obvious good human deed aspect. If making $ is the goal, wouldnt a member rather pay himself through a distribution (understanding he will be taxed on it) rather than just giving money away to lower taxes (IE not paying himself at all)?

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A member does not get taxed on a distribution (well, he or she can if he or she does not have enough basis). He or she gets taxed on his or her share of the income of the business, whether distributed or not.

I have always felt the best plan is to buy what you need and otherwise expected to buy in the near future, and leave the rest in the bank. Have it for future needs. But, as you say, around April 1st, distribute to the members an amount to cover the tax created from the company profits. Or distribute even more depending on the needs of the business.

Sounds like you and your group are going to have a great year, congratulations on that!