Transferring to an LLC - Posted by Kerry Robertson

import · November 21, 2007, 10:10am

Posted by Kerry Robertson on November 28, 2007 at 07:21:46:

Thanks so much for both your comments.

import · November 21, 2007, 10:10am

Posted by Kerry Robertson on November 21, 2007 at 11:10:17:

Hello All,

My partner and I have an LLC but purchased a property in her name and not the LLC because the HML preferred did not want to put it in the LLC and my credit was a little shaky. Anyway we rehabbed the home and have a few interested buyers and wanted to know what it the best way to handle this. We can just sell it but then that will show as all her income when she files her taxes even though she will be paying half to me. We do have a LLC. Does anyone have any suggestions. Can we transfer to the LLC then to the buyers or does it need to be recorded first? Someone told be that if we did it like that that would just be double taxes. Can someone please advice because we would have to to do a lot a figuring out of stuff if she has to pay taxes on my half.

Thanks so much!

import · November 28, 2007, 6:23am

Re: Transferring to an LLC - Posted by Kerry Ronertson

Posted by Kerry Ronertson on November 28, 2007 at 07:23:10:

Thanks so much for your responses

import · November 26, 2007, 1:58pm

Liability consideration - Posted by William Bronchick

Posted by William Bronchick on November 26, 2007 at 14:58:45:

The LLC is a partnership, so if you transfer to an LLC first or sell directly, it’s reported on a 1065 partnership return either way, as correctly analyzed by Frank below.

One other consideration is liability. If you have an issue that comes up with either title or the repairs you did, transferring to an LLC first before selling could limit your liability.

import · November 22, 2007, 3:27am

Re: Transferring to an LLC - Posted by Frank Chin

Posted by Frank Chin on November 22, 2007 at 04:27:17:

Kerry:

I wouldn’t transfer to an LLC just for reporting the taxes. It would be just as efficient if both of you filed a “partnership” tax return (or even none), and from then take the income from your partnership returns, to the personal.

Besides, most of the time, when getting a bank loan, reporting the sale of the property, only ONE “social security number” is used for reporting, even if both of you are on the deed, and the income is reported separately anyway.

For instance, I owned a rental with my sister, she manages it, and the loan, and finally the sale was reported under my SS#, even though it’s got both our names on the deed. We each reported our portions on our respective tax returns. We needn’t even go thru a partnership return.

BUT, it things are not split 50/50, or in situations where, say

someone puts down 100% of the down payment
someone else is repeosible for 100% of the mortgage
someone takes 100% of the gains

That is, if the partnership is 50/50, but each of the ELEMENTS is not, you best should have a partnership agreeement, file a partnership return, and then allocate the 'earnings" as agreed, i.e. 50/50 or whatever else it is, via the K1

Seldom do do get an inquiry from the IRS saying the tax return didn’t match the 1099. I recall it only happened once thru the years, and we sent them a reply saying I reported part of the income on our taxes, and the balance was on our partner’s, with copies of thet tax form. This could’ve been avoided filing a partnership return which we skipped.

If you folks never done this before, have a CPA do it the first time, so you’ll be OK on your state and local taxes as well. You can then skip the CPA on subsequent years.

Frank Chin