Hi there ,
So I’ll soon be closing on my first deal, it is a vacation /ski rental , numbers are as follows .
Sale price: 130,000
Annual rental 15,000
Now for the part where I'm looking for info , I am buying the property in my name with a mortgage. All the cash I am using is coming from my LLC for DP and rehab etc .
The reason I have this LLC is I had money in a self managed superannuation fund (401K) in Australia . I wanted to use this money in the US where I now live , the only way to do this was to set up an LLC and issue shares from my LLC here to my 401K In Australia.
So in this LLC there is $51,100, all of the money except for the $100 came from the Aussie 401K
I now need to issue shares to the 401K. How do I put a percentage on the membership interest of these shares ? I was thinking 4 shares totalling 40% membership interest and each share valued at $12,750?
Leaving the other 60% in the LLC for me ,( I am the manager and only member )
I was just going to write all this in the membership interest ledger in the LLC operating agreement and also issue membership certificates.
The next task is this, at the end of the year I need to value those shares and show the tax office in Australia that they have increased in value, EG: $51,000 to $57,000.
How do I put a value on those shares when the cash that backs them has been taken from the LLC and invested in the house in my name leaving no money in the LLC account except for rental income which will be earned and lodged directly back to the LLC .
I was going to increase the value of them by forced equity and rental income (cashflow is $6000 after mortgage/expenses .
I am not sure how to link the increase in value from the property and income etc back to the LLC and in turn show the Australian tax people the money has been invested properly .
I realise I need to see a CPA about this but it would be brilliant to get some information so I know what I’m talking about when I see them .
Thanks for reading .
Regards Liam O Sullivan
G'day @Liam OSullivan
I would definitely ensure you seek a CPA for advice re this. You will most likely find that there are extremely stringent regulations surrounding the SMSF in Australia. Even if you are investing in the US with the funds, which is generally allowed, you are not likely to be able to share the funds with other funds from yourself. may have to keep these two sources of income seperate. Talk to a good accountant about this for sure!
Éirinn go Brách!
(hope you're Irish)
You really need to get with a CPA and attorney about this...
What you're doing is pretty complex, and I'm leaning towards you may have (either knowingly or unknowingly) created a partnership filing obligation (Form 1065) with foreign withholding exposure and all the fun that goes along with that because the Superannuation Fund is a member of the LLC.
Then you have the Australian Superannuation itself which is a grey area itself and heavily debated in the tax community -- primarily about how and if it should be reported for a US citizen or US resident alien. Is it privatized social security, is it an employee benefits trust, or is it a grantor trust? Most agree that it's not privatized social security... Although some CPA firms take this position. Whether it's treated as an employee benefits trust or grantor trust has very different tax ramifications... I'll let you talk to your CPA about that...
Very easily to make mistakes if you DIY this...and the penalties for even non-negligent foreign filing failure are steep.
As far as valuing the shares at EOY, I would just use book value. I'm assuming you'll be sending or accruing interest to the LLC from you as an individual throughout the year... That will increase book value.
If you are looking to buy US property with your super, I know Aussies who have used a SMSF.
Thanks Lindsay ,
Yes I’m going through the process with my Australian accountant , asked someone at the ATO some questions also, looks like I’m all good with my plan , I’ll report the performance of the shares at the end of the year to the ATO, if they do look beyond that everything is above board , it is an investment property , I know there has been precedent before with people getting in trouble with using smsf money for personal holiday homes etc.
Hope all is well in Melbourne, my favourite city in Australia.
Go raibh maith agat Eamonn,
I am surely , from West Cork, and you ?
Yes I’m going through the process with a CPA here and an attorney, went to quite a few before I found someone that understands it fully, it is a little unusual I know , the Australians are happy with what my plan is , as far as the taxing of the super here , there has been a case where some Holden (General motors ) employees moved here from Australia and were facing taxation on their super , they were able to prove it is a state mandated occupational pension fund , if it is still active and not cashed out it is exempt from tax , mine is still active and investing in real estate, my biggest concern was keeping the Australians happy and after consulting my CPA, Attorney and my Australian accountant I believe we have a plan for that.
My grandmother is from County Roscommon. I on the other hand am an American mutt. The name is misleading. : )
Good to hear that you're roping in professionals on all sides of the border. They'll keep you compliant and advocate for you. Best of luck.
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