Capital Gains Tax Implications for Property Deed Transfer to LLC

[Ali Mol]

I have thoroughly reviewed Publication 523; however, it does not address the specific question I have. The scenario involves a couple who have decided to sell their property to leverage the advantage of the capital gains tax due to their residency for over 2 years within the past 5 years( purchased property in 2014 , convert it to rental in 2021 and rent it for 23 months) , alongside fulfillment of all other eligibility criteria outlined in IRS Publication 523.

Given this context, if the couple transfers the property deed to a LLC company, with the husband owning 51% and a third party retaining the remaining 49%, would this transaction still be excluded from capital gains tax? It is important to note that the husband's retention of the 51% share is a requirement from the bank to maintain the current mortgage at an exceptionally low rate. Your insights into this matter would be greatly appreciated.