i am in the beginning of 45 days escrow process to purchase a house in LA which i will use either as rental or live in one room and rent another. what would be the right thing to do right now? to form LLC before title exchange to my name? or shall i just buy on my name and quit clame later? or - i just have read a blog in BP by Ken Corsini that not Quit claim but rather should be Warranty Deed.i have to say my CPA doesnt know the answers...:)
@Julia Fergo If its just you, just get s great umbrella insurance plan rather then a new LLC
Deal with it later, you're living in the house anyway. CA has a high upkeep on LLC and other legal paperworks, not yet worth it if you only renting another room.
Don't go to a CPA for legal advice. However the choice of an LLC has both legal and tax implications. Sometimes these can conflict and you will get differing advice from an attorney and a CPA
However I am shocked you CPA didn't mention the capital gains exemption for your personal residence. I believe the number is 3 of the last 5 years and you personal residence is exempt from the first $250k in capital gains. This would not apply if you owned the property in an LLC. This could make a big difference in your taxes so shame on your CPA for not advising you. You should get some good tax advice here.
What would I do? I would buy in my own name if I was going to live there. But I am neither a CPA nor an attorney.
People use the term Quit Claim deed all the time but generally it is overused. There is no advantage to a quit claim deed only disadvantages. Use a stronger deed; warranty or special warranty unless there is a specific reason not to.
Thank you guys for the valuable information. It just cleared the picture for me. @Ned Carey got it, as long as i am planning in the future to sell and benefit from the 250K capital gains free profit I shall not do the LLC! Nobody told e that before...:( Would you please advise where can I learn about the warranty deed? I will have to look for a new accountant and real estate attorney as well. @Nick Britton umbrella insurance seem to be the answer. @Manolo D. thank you.
@Julia Fergo Google is always a good place to look
A Quit Claim deed essentially says: IF I have any rights in this property any rights I may or may not have are now yours. I can legally give you a quit claim deed to the Empire State Building. (Maybe the Trump Tower would be a better reference today)
A warranty deed says the seller guarantees the title back to as far as the records go.
A Special Warranty deed says the seller guarantees the deed to the extent they did nothing to screw up the title while they owned it.
The above is not to be considered legal advice. It is just my laypersons understanding of the law.
Huh @Ned Carey i love it, right to the point!! I am laughing but at the same time i realize how pathetic I am need to learn more.... never late to learn and die stupid...:)
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