Personal residence into FLP - Posted by Bob

Posted by Diane (TX) on November 29, 2002 at 21:31:25:

  1. Transfer into FLP is not a taxable event. (It’s a nontaxable transfer, not a sale.) Your cost basis and holding period carries over to the FLP.
  2. No one can claim the home sale exclusion if FLP owns home when sold. FLP does not (and can not) meet the required use test of two years as a personal residence. Your former personal use is not imputed to the FLP.
  3. If FLP sells, FLP will owe capital gain on sales price less your basis (without the gain exclusion allowed for personal residences, per #2.)

My take, but this is not the best asset to transfer to the FLP. Check with your tax advisor.

Personal residence into FLP - Posted by Bob

Posted by Bob on November 29, 2002 at 18:52:36:

If I placed our personal home into a family limited partnership for asset protection and future estate planning, is this a taxable event as far as the IRS is concerned? Will we (wife and husband) then not be able to claim the $250,000 exemption upon the sale of the property in maybe 5 or 10 years because it is in the FLP entity?

Or will the FLP owe tax on the difference between the transfer now and the sale later?

Thanks in advance.

Re: Personal residence into FLP - Posted by Nate(DC)

Posted by Nate(DC) on November 30, 2002 at 24:04:04:

I agree with Diane, this is not the asset to be putting in a FLP. Why not put it into a living trust for estate planning? As far as asset protection goes…

  1. Make sure you’re holding by Tenants By The Entireties (if your state allows).

  2. Make sure it is registered as your Homestead (if your state allows).

  3. Buy copious liability insurance. A $1MM umrella policy is under $500 and is VERY cheap peace of mind.