Deed transfer from C-corp to personal

12 Replies

Hi

I want to move a property from my C-corp to my name. 

How to transfer deed? 

Any payments or consideration necessary from me to company? 

Any tax implications? What about depreciation and tax resulting from that (Will my company pay tax because of past depreciation)?

Now if this was a profit transfer from company to me, I would have to pay tax. But when it is property what changes?

Thank you

Way too many variables in this type of transaction, would have to know your entire individual and corporate tax situation, For example, depends on your percentage of ownership before and after the transfer, your bases in the property vs. it FMV on date of transfer, and a bunch of other information. You need to talk to licensed tax professional in your area, some one with some letters behind their name.

Hope this helps,

Good luck!

@Emin T. , we do not have enough information to help you.  There are many things to consider.  Is the corporation use a Sub S election?  Are you the only shareholder?

You need to have a corporation meeting, you need to have minutes, you need to have a sale price you need to have terms.  It needs to be an arms length transaction.  The number one way to pierce the corporate veil is to treat company property like your personal property.  Transfer a valuable property to yourself for free and you might as well collapse your corporation and hold everything in your personal name, you no longer have any liability protection.  It will be deemed to be your alter ego.

Jerry,

Great answer, thank you.

I am the only shareholder.

My intention is not to pierce the veil. It is to reduce exposure to lawsuits. The company also has other properties.

Basically, as noted above, a Corp meeting would be held to create an asset distribution.

For an owner/ceo/office of the Corp, title recording can be via quitclaim, zero dollar sale, and a purpose on the PCOR of "change of vesting".

I did this with a Corp vehicle.

For any non-officer - - see an attorney.

Updated almost 6 years ago

oops. For an owner/ceo/officer

Emin, in my opinion, moving the property into your personal name does not offer any protection from lawsuits (I'm not clear on what type of lawsuit has you concerned.. something against the company, or you, or because of a liability related to the property?), and will guarantee that you, as the property owner, become the target of any lawsuit involving a property-related liability.  

You mentioned that the company has other properties.  That is a concern.  If a suit is brought against the company, then all of your properties, because they are assets of the company, are at risk if you should lose.  Everything falls like dominos.  I'm aware of two common solutions to avoid that...

The first is to create a single-asset LLC for/to hold title to each investment property. That way, if a suit is brought against any one LLC, the other properties/LLC's are not directly involved.

A much less expensive, faster, and simpler method is to deed each property into a separate Revocable Living Trust.  Trust details are not public, great for privacy, and done properly, make it difficult for those wanting to sue you, or for that matter, for them to even know that you have assets worth coming after.  ( Basic rule, to prevent asset loss to predators, is to never hold any significant personal property or real property assets in your personal name, instead, you want to control the entities that hold the assets ).              Assets in your name tend to attract shark attorneys.

For solid info about DIY trusts, visit nolo (dot) com, and also research: "using land trusts to buy and sell real estate" via google.  The use of trusts is one of those great, little-known secrets.  TIP:  Do NOT call your trust a "Land Trust", that's a sophisticated instrument for more complex situations, and the words "Land Trust" will sometimes set off bells, whistles, and alarms that will send your escrow agent's legal department into a frenzy, 'nuf said.

As always, seek the opinion of professionals that specialize in the RE investment world (atty. & CPA);  Get referrals, many of the professionals will tell you they practice in the RE space, but in reality have little-to-no experience there, and do not have the up-to-date specialized knowledge you need.

(I am NOT an attorney or accountant, these are my opinions only, not legal advice).

Happy investing!

Greg,

These are invaluable stuff. Thank you.

I've heard about trusts but only in context of times when you want to transfer properties to children.

Exactly what qualifications should I search for in a CPA? I am confused as to go to who? CPA/lawyer/RE advisor or the are there people in the intersection of all these?

@Greg Goldsmith , a few questions.  It is my understanding that a trust cannot hold property in it's own name.  It must be held in the name of a trustee, ie. John Smith as Trustee of the Ace Trust created January 1, 2000.  I do not see how this transaction in anyway protects you from liability?  I assume you are trustee of your own trust and do not pay others to manage it.  If someone is injured on the land in your trust , they will sue John Smith, as Trustee of the Ace Trust.  Then they will hit you with interrogatories and requests for production of documents asking who the owners of the trust are that you are required by law to answer.  They will probably ask for information about all trusts you are trustee for.  If it appears the amount in controversy exceeds the value of the trust property they will ask for all property you hold a legal interest in, which will require you to disclose all your other trusts.  A property search online will show all trust property you are a trustee on.  How will any of these trusts limit liability or shield assets?  If you truly have millions of assets and you have hired trustees to manage your property you can play hide the ball a lot longer, but if you have that kind of money you may as well incorporate and hire a board of directors to run it and again have protection from liability.  I have heard claims of trusts working to hide assets but have never had anyone explain to my satisfaction how it truly protects assets.  I have had people selling them say they can prove it but only after clients pay many thousands of dollars to purchase their secret recipe.  Have you been to some type of school where they sell this idea?  Absent some really good information I would advise @Emin T. to avoid trusts unless it was done for estate tax purposes.  there are some very good tax reasons to use trusts especially if your estate is over 5 million.

Thank you for the class @Jerry W. and @Greg Goldsmith .  I don't know much, but I don't own RE inside of a corp.  Tax mess, x2, as in double.  Terrible medium of ownership from what I understand.    Just my coin.  Cheers!

@Jerry W., great questions. First, let me agree with you that trusts will not directly protect you or your assets from liability or lawsuits, that is correct, you always want your first layer of protection to be a corp. or LLC entity. Trusts have a different set of advantages for RE investors/owners, and to answer your first point, you would never want to be the Trustee of a Trust you created. That lays a trail of breadcrumbs right to your door. The best scenario is to have someone you trust explicitly named as your Trustee, ideally an attorney, as they have the expertise to handle wolfs should they come sniffing at their door.

Here’s a real-life example of how, as a real estate investor, you might apply this:

Your entity, The ABC LLC, puts an investment property under contract. You immediately create a new Agreement and Declaration of Trust, naming it perhaps the 123 Main St. Trust (after the address of the property, easy to track); Your Agreement names Al Attorney as Trustee. You direct the closing agent/escrow officer to deed the property to your Trustee at closing ("for tax and accounting purposes"). You also prepare an Affidavit of Trust, which basically states only who the Trustee is, what his/her duties are, and identifies the subject property, but none of the private details of the Trust's parties and terms. The escrow agent records the new Warranty Deed to Trustee and the Affidavit of Trust at closing, but never the Trust Agreement itself, in fact they have no reason to see the agreement itself, that's private.

Sounds complicated at first, but it’s not. All you have accomplished is another layer of protection that makes it very difficult for wolfs to see if you have any assets worth coming after, afforded a huge degree of privacy and flexibility in your transactions (to a degree far beyond what we could cover here).

As you review this example, you will note that the property was never held in the name of your business entity, the ABC LLC. Further, the deed/title transferred from the seller directly to the Trustee. Nowhere in any publicly recorded docs is there a visible connection between your business and the asset.

When a greedy shark is considering suing the pants off of you, the first thing they do is search public records to see what assets you have that they might want to take from you. With the strategy above, there is no paper trail, and they can deduct that you own nothing of value, or that you appear savvy enough to make them go after easier targets instead of you.

Yes, if they are convinced you are hiding assets and their client will pay them a big retainer, they could possibly depose you and try to find every penny you have. For the sake of brevity, if that bridge hasn't already been crossed here, suffice it to say a good attorney in this scenario can hold them off and have them chasing their tail legally until they give up... or, worst case scenario, they beat you up in court and wipe out your ABC LLC. That is why you want a separate entity for each property, with good business liability insurance and corp. or LLC records properly maintained so they can't ‘pierce' the corp veil and get to your personal assets, which, incidentally, should be held in a trust also, unless you want to make it easy for anyone to know what you have.

If you have more than one major asset in an entity, a problem with one of them can easily result in the loss of them all.

To review, good practice is to use a corporate entity with liability insurance, keep it up to date, don’t co-mingle personal funds or the entity will be disavowed for asset protection, secondly, use single-asset entities to avoid one problem wiping out all your assets, and third, incorporate trusts for an added layer of privacy from greedy sharks looking for a fat kill.

Something to ponder: Trusts are Personal Property, real estate is Real Property. Each has different rules, regulations, taxes, and endless opportunity for creative transaction structuring, but I digress. OK, Hint: Can you sell personal property (a Trust) at any time without there being any public record of that sale?

Lastly, regarding using trusts for your personal estate, yes, there are very good reasons

to use a trust or trusts (attorneys don’t want you to know this next part, they love to have a huge book of Wills and Probate business), it’s worth exploring how they can avoid Probate and all the related expense and drama (I’ve heard they’re still fighting over the Howard Hughes estate!).

@Emin Temiz, regarding finding professionals, I’d ask local investors who they have had good experience with as far as an experienced real estate specialist attorney, and when you find that attorney, he/she will know of a good CPA that works with RE investors. BTW, most attorneys will have no idea how to use trusts just for real estate, and might even tell you something crazy, like why they’re illegal, immoral, and fattening, and why you shouldn’t do that. Translation is, they don’t have a clue how to do it. Run away from them quickly.

And of course you have the great community here for answers to your other questions as they arise.

(As always: I am NOT an attorney or accountant, these are my opinions only, not legal advice, and quite possibly worth only as much as they cost you).

@Emin T. We don't know your objectives nor any/all of your exposures.

Since you original established an entity for some particular reason, it's really impossible to say what you will do to further complicate your situation.

It would appear on the surface that you are trying yo do thus in the cheap rather than seek the professional legal and tax advice that you truly need. Getting free advice on a public forum is no substitute for spending the money with a professional who asks you ALL the right questions and creates a comprehensive picture. 

Or just wing it and live with the results.

Lots of info above. so let me summarize for everyone.

NEVER, never, never hold a long term asset--a rental property--in a corporation (Inc.) or an LLC that has been "s" or "c" elected.

Taking a rental OUT of one of the above IS a taxable event. How much depends on things already discussed above.

We (almost) never use the corporation (Inc.) entity for our real estate clients. The LLC is a simpler entity structure to maintain, and can provide better asset protection.

1) For RE agents (commissions), contractors, flipping, wholesaling, birddogging, etc., we set up an LLC and do an "s" election on it (telling the IRS to tax the LLC "like" an s-corporation). This is a tax savings entity because the income from those things is taxed at ordinary income tax rates. Don't put a rental into this!

2) For rental properties, we set up an LLC, a combination of LLCs and partnerships, and/or a series LLC, depending on the number of assets, value and advanced asset protection we are looking for. These are asset protection entities!

1) and 2) are different types of entities with different tax classifications because they are used for different purposes! Please consult an attorney, and CPA, knowledgable in real estate investing and understands the different income streams and asset protection.

Never hold investments properties (rentals or flips) in your personal name.

Many clients hold "title" in the name of a "land" trust for privacy purposes. There is no asset protection value. Just privacy. And this is NOT your "family living" trust. Our recommendation is NEVER put business assets (or the LLCs that hold them) into your family living trust. Many estate planning attorneys will recommend this when they set up your family trust, and you will lose much of your asset protection. Use transfer on death agreements on your business entities for estate planning purposes and to avoid probate of your businesses. If your attorney doesn't know what those are, find another attorney. Yes, you can put your personal residence into your family trust. That we do all the time.

The beneficiary of the "land" trust is their LLC. This provides the protection.

Whether title is held in the name of the trust itself, or the trustee of the trust, depends on the state. In states where it's the name of the trustee, you'll need to find someone to be the trustee if you want the privacy. This can be a pain. Utah is like this, and my clients actually hire my office to be the trustee. Lawyers often do this.

I have hours and hours of free video education on this on my website. Grab a glass of wine and enjoy. :)

Happy investing!

Jeff

Good afternoon Mr. Temiz;

When dealing with land transactions and protecting your assets, you should absolutely seek out a local attorney, and not rely on the advice of people you find in other states on the internet. Trusts and corporations are creatures of *state law*, and snippets of information that investors have received or gleaned from their own state practices will most likely not apply to your own. The only person you should listen to when it comes to *asset protection* is a licensed attorney in your state. No one else. For estate maximization, you should consult a CPA to reduce overhead and manage taxes.

There are a number of things I saw in this thread that worried me, in terms of advice being offered on how LLCs and Trusts operate; much of which doesn't apply in my own jurisdiction, and is likely to not apply in yours. Find an attorney soon.