Trusts, Entities. Tax 2018 questions

3 Replies

Hi BP Family,

Just listened to podcast #2, @Karen Rittenhouse. So helpful from W-2 starting out to finding deals, learning the revenue model, and expanding into holding long term rentals for retirement and paying those mortgages off.   

She mentioned forming trusts and other business entities to secure the assets for her children and beyond. Could others help with how this works? What are the entities used for holding multiple properties? Do investors use one holding company (LLC or C corp) to hold all of singular LLC properties? If used in this way can funds from one cash flowing property be used to make a repair in another one?

For trusts, how do investors control their properties but not own it or have properties placed on asset sheets?  Are trusts the only vehicles used for this? 

Does anyone have experience setting up a private foundation or other form of nonprofit used to direct funds to educating youth on investing or to provide funds to nonprofits? 

Are landlords required to LLC properties to take advantage of the 20% pass through deduction?

@Peter Lim

You need a good (great) real estate CPA to set up your entities. They will be formed based on your business model and activities. There are many ways to structure but they have to be set up to fit your business model specifically.

We put all of our hold properties into land trusts for many reasons - privacy, tax structure, flow through to heirs. 

But all of this is far too complicated to answer in a post. The most important thing is a great real estate CPA. Not all your structure will be set up at the beginning, but it will morph and change over time as your business and holdings grow.

Originally posted by @Peter Lim :

Hi BP Family,

Just listened to podcast #2, @Karen Rittenhouse. So helpful from W-2 starting out to finding deals, learning the revenue model, and expanding into holding long term rentals for retirement and paying those mortgages off.   

She mentioned forming trusts and other business entities to secure the assets for her children and beyond. Could others help with how this works? What are the entities used for holding multiple properties? Do investors use one holding company (LLC or C corp) to hold all of singular LLC properties? If used in this way can funds from one cash flowing property be used to make a repair in another one?

For trusts, how do investors control their properties but not own it or have properties placed on asset sheets?  Are trusts the only vehicles used for this? 

Does anyone have experience setting up a private foundation or other form of nonprofit used to direct funds to educating youth on investing or to provide funds to nonprofits? 

Are landlords required to LLC properties to take advantage of the 20% pass through deduction?

Your question required a lot more detail to provide you with answers. 

You answer your last question- no you do not need LLC for 20% deduction, but your rental activity has to qualify for the deduction. There needs to be a good planning done going forward to make sure IRS will not challenge your qualification. What I am referring to is you need to have trade or business to take the 20% deductions. And, IRS might not treat your rentals as such. So we have to plan in such a way that there is more possibility of treating rental as trade or business.