How should my LLC acquire existing properties NOT owned by me

Question

My fiancé has a few properties that he owns outright (no mortgage/liens... etc) and we want the properties to be owned by my newly formed LLC (single-member with me as 100% owner). What is the best way to accomplish this and still have the ability to benefit in terms of depreciation and expenses)?The properties need a few repairs and updates and we want to be able to write these expenses off. After the properties are "Rehabbed"... One of the properties will be fixed and flipped and the other two will be rental properties. Should he do some sort of Quit Claim or Warranty Deed or should he "Sell" the properties to the business and go through a closing or something entirely different? Thanks in advance!!

Natalie Kolodij · Answer

Oh- well rentals are passive income so they won't off set your w-2 wages unless you're a real estate professional per IRS standards.

Passive losses can only be used to offset other passive income.

This won't offer you any real tax benefit as far as I can see- But I would recommend you guys sit down with a CPA and see what type of strategy would work best :)

Cody L. · Answer

Have a title company do it.  It's not expensive.

But note that if the property is in your name or an LLC, the tax situation is 100% the same.  If the property has $x in income and $y in expenses, then you made x-y.  Doesn't matter if its in your personal name or an LLC.

I have a single LLC for each property (requirement of a refinance I did a while back).  I can tell you that my CPA doesn't care about what LLCs are what.  And I just do a "personal" tax return just like I did before (only now it's 100's of pages)

Natalie Kolodij · Answer

This is just going to transfer reporting from his 1040 to yours...a single member LLC is just going to be a disregarded entity so I'm not super sure on the intent here. Legally it will be held in an LLC and you will report everything on your schedule E instead of him. This should be able to be achieved with a quick claim but that isn't my area of expertise so I would confirm.

None of the benefits will change in any way the basis and prior depreciation will carry over from whatever it has been in your fiance's name.

With regarding to writing off expenses/repairs/ rehabbing- Any major renovations will need to be added into the basis of the property and depreciated going forward not just expensed.

Tisha J. · Answer

Great information @Lance Lvovsky - We definitely did not consider the "gift" aspect... Good to know!

That makes sense @Cody L. Thanks Guys!!

Tisha J. · Answer

We will definitely sit with a CPA... I need to educate myself on this issue more so that I will know exactly what to ask😳 Thank you!!

Tisha J. · Answer

The intent of moving his properties over to the LLC is to lower my tax burden... Reason: In addition to the business, I am employed with a 6 figure income with little to nothing to write off and since we must rehab the properties either way... We think it would be a better fit for me to reap any tax benefits while we are growing the business.  We just need to be sure everything is done properly.

How should my LLC acquire existing properties NOT owned by me

Most Popular Reply