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If I own a C-corp or an S-corp in the US ( say for example Delaware ), and I take profits from revenue after expenses for the corporation and purchase stock in the US stock markets, bonds or other investment property without selling any of those investments purchased by the time of tax filing, would that reduce my corporation's total tax liability?

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No, you cannot. Investment is not a tax-deductible expense.

  • Another answer conflicts. Would you might clarifying your position? The other answer seems to take a different tack – MrChrister Dec 18 '13 at 16:34
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    @MrChrister the other answer doesn't answer the question. The OP wants to reduce tax liability of the corporation by making private investments - cannot be done. You can defer portion of the tax using various retirement vehicles, but that would be the personal tax, not the corporate. – littleadv Dec 18 '13 at 20:14
  • Thank you littleadv .. So just to clarify, let's take a food chain as a hypothetical example: If the food chain takes food profit and purchases property to open additional chains would that not be considered an expense, reducing tax liability? In other words, is what constitutes an "investment" subjective to the business being operated? Similarly, if I started an investment company specifically designed to profit from stock investments, would those stock purchases not be considered expenses? – sean2078 Dec 29 '13 at 0:02
  • @sean no, that wouldn't be an expense. That would be an investment, non-deductible. However, putting a capital asset (an investment) into a business use (i.e.: using a real estate property as the chain supermarket, for example) allows depreciating the capital asset over time, thus reducing the tax liability. But you have to put the asset into the business use. You cannot do that, for example, with stocks or bonds. – littleadv Dec 30 '13 at 5:42
  • Thanks littleadv - I believe I see your point. Because you're purchasing a building in the example ( or the stocks ) and it does not lose value per se right away, you're collecting income in the form of an asset and that's not an expense. Purchasing chicken for sandwiches for example for sale would be however as they immediately lose value from going out the door and drive business value from use ( feel free to correct if I'm wrong ). Thanks for clarifying! Too bad the IRS rakes everything – sean2078 Feb 5 '14 at 20:16
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Yes you can... By opening a pension fund and putting excess cash in there you can protect your cash. While the cash is in a protected pension fund. You can self-direct the funds activities or have someone do it for you. How ever you do have to make this fund available to all employees.

  • You will need to consult a professional on setting up fund properly... AND don't take "no you can't do it as an answer" Find someone that will tell you this little secret. – james Dec 18 '13 at 15:53
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    What do you mean by "pension fund"? In the US, retirement programs are identified by the sections in the IRC that define them. Which one are you referring to and how will it be able to reduce corporate taxes? – littleadv Dec 18 '13 at 20:12

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