Thanks for the input guys! It's a C-corporation with three owners, active in the business, and of course the decision for how to invest it would depend on the approval of all of us.
We're avoiding paying it out just to keep it in the corporate structure for future expenses. It's definite more than we would usually spend in a year but it's possible most of it would be spent if we needed to do a lot of tenant improvements and also had maintenance costs. Everything in commercial real estate is expensive so even a large savings can be spent pretty quickly when the occasion comes up.
I'm in a similar situation and I'm trying to decide how to proceed...
Consider that:
- Biden wants to increase tax rate on dividend to 40% (up from the current 0-15-20%)
- There is an Accumulated Earning Tax that the IRS can impose on accumulated earnings in c-corp, that match the current tax rate (more likely to happen once the tax rate goes up to 40%)
- All the spending programs need funding (a lot of funding), Green New Deal alone is in the Trillions of dollars.
- Money printing it is likely to continue.
- Interest rate are staying a 0% for at least another 2-3 years, according to Gerome.
It would not be unreasonable to: distribute some dividends taking advantage of the favorable tax rate, and/or buy/build more properties in opportunity zone areas, and/or buy a competing business, buy a McDonald.