About Off Balance Sheet Tax Structures

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Off balance sheet tax structures are sometimes necessary to accommodate various situations, such as Key man Insurance contracts and land agreements. Understand when off balance sheet contracts are acceptable with help from an enrolled agent in this free video on filing taxes.

Part of the Video Series: Filing Taxes
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Video Transcript

My name is Penny Tokash; I'm an Enrolled Agent. My company is Tax Facts Incorporated. We're located in Jonesboro, Georgia. I'd like to talk to you today about off balance sheet structures. These can be several different forms; some of them more acceptable than others. One of the ways that a corporation will do an off balance sheet contract is with the principals forming a partnership in order to provide Key Man Insurance. That's pretty common and pretty acceptable. The insurance policy does not appear on the corporate balance sheet because it's an agreement between the partners in order to provide insurance in case one of the partners should pass away. Another type of contract that is not on the balance sheet of a corporation is one; for instance say home builder, can't afford to buy a large track of land. Well he finds an investor who will buy the land and develop it and then they enter into an agreement where he will, the developer will release three or four lots at a time. So the land itself never appears as an asset on the home builder's balance sheet nor does the loan or the agreement that he has with the other company appear. That could be good; it could be bad; it just depends on, on; NRAN was involved in a lot of these kinds of contracts and it turned out to be harmful to the shareholders. So the more transparent the activity is the better.


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