I suppose I should be consulting a tax attorney but before doing that I decided to get some feed backs from other real estate experts on this forum.
I had 2 real estate investments which I sold about 1-2 years ago under my name. The proceeds of those sales I decided to reinvest but flip homes instead of renting out the homes. I got married about 2 years ago and I decided to have my mom create an LLC that is taxed as a corporation and I transferred my money into her account. She is the only member of the LLC and she is a foreign entity as she doesn't live in the US. I do have complete access to the LLC bank account and my name is under the bank account too.
I purchased a major fixer upper property under the LLC (my mom is the sole owner of the LLC). Title is under LLC name. I am fixing the property myself and I use some help as well. I have decided to keep the property for over a year and then sell it. LLC has borrowed hard money loan on this house.
Will the LLC be considered as a dealer or investor considering that it will be kept for over a year?
The LLC does pay me occasionally for the work I perform but I am not under salary.
Will the LLC have any tax breaks if it is sold after one year under capital gains?
The total gains for the LLC is really dependent on how much the LLC pays me! Lets say the LLC profits $50000 after one year of selling the house. Out of that profit $20000 goes to me (this is in addition to the payments made to myself during the renovation) so the LLC is left over with $30000 of net profit. How much would be the taxation of that $30000? I understand that I would have to file my $20000 plus any other income that I got under my personal income taxes from which I can have deductions such as the mileages driven.
All responses will be much appreciated.
@Amir S. You have a VERY VERY VERY Complicated situation here. I would definitely talk to a CPA.
If your intent was to sell for a profit, not hold and rent out, the 'year' of ownership doesn't matter. It is inventory and you will be taxed at the wonderful rate all flippers receive- ordinary income!
The LLC and foreign investor status will be better answered by a highly qualified and highly compensated tax professional. Enjoy!