Sales proceed from LLC property

Investor · Allen, TX · Member since 2017 · 18 posts · 2 votes

Hello, have a basic question. My rental property is under LLC and is under contract. Can the sales proceed be deposited into my personal account vs LLC checking account? The rational is use the proceed to purchase another property under my name (as mortgages are easier to secure with favorable rates) and then transfer new purchased rental to new series LLC name.

The LLC is a series LLC with myself and my wife as members in state of TX.

I just want to ensure this is legal and don't want to miss out on any tax benefits by depositing into my personal account? Title company can make the change to transfer my rental under contract from LLC to my name they just need to know what i decision is.

Thanks,

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Wayne Brooks

Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes

I wouldn't.....there are no difference in tax consequences whatsoever. Either way, getting the proceeds directly in your name, or transferring them from the LLC to you after, probably Both make it easier for someone to pierce the entity veil later on, assuming this is why you have the LLC, as you are commingling/moving the money back and forth between you and the LLC....showing that you and the LLC are really one in the same....easy pickins for an attorney.

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
6y
I wouldn't.....there are no difference in tax consequences whatsoever. Either way, getting the proceeds directly in your name, or transferring them from the LLC to you after, probably Both make it easier for someone to pierce the entity veil later on, assuming this is why you have the LLC, as you are commingling/moving the money back and forth between you and the LLC....showing that you and the LLC are really one in the same....easy pickins for an attorney.
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Scott WolfPro Member
Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 959 votes
6y
@Ron D., if anything there would be benefit by keeping it in the LLC and 1031 exchanging the property if there are gains. Happy to discuss the process if you're interested.
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
6y
@Ron D., I agree with Wayne Brooks here. You're not going to save any taxation that way. You'll be destroying the power of what you built through the series entities and making piercing the corporate veil extremely easy. If you want to go that route then I would dissolve that LLC and have the title company distribute the property to you before selling. That way you're at least hopefully not weakening the entire chain. But the series LLC is an interesting critter and there may be some nuance I'm missing.

My main concern with your plan is that you're doing something that will guarantee taxation on the gain. To possible save a little bit on interest rate. You may want to proforma that. Because if you want to that LLC could sell and do a 1031 exchange and defer tax on all gain and depreciation recapture. That would probably require leaving that property in the LLC. But a tax bill vs a half a point of interest might be an interesting comparison.
And depending on where your LLC series flows there's a slight possibility that you could actually sell as the LLC and 1031 and buy as yourself. Just need to see the LLC structure first.

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