Rental from a closely held LLC

2 Replies

My wife's family farm which includes 320 acres and two houses has been placed in an LLC. My wife is a 1/6 shareholder, her sisters each hold 1/6 and her aunt 3/6. If my wife and I were to rent one of the houses at market value from the LLC could improvements and repairs on the house by paid for by the LLC and taken as business deductions by the LLC? If my wife's share were passed to our daughter could the LLC do it then?

I would think as long as the LLC holds title to property then all income is reported on taxes by the LLC.. so income from rent would be paid to the LLC by whomever rents the property, AS soon as the property has a rental occupant then the cost of repairs and management fees ect as part of profit loss statement on the property rented and are expense that's deductible for taxes. Land can be rented / leased out someone for farming.

As far as your wife passing her share to daughter, I guess the LLC other members would have to agree to that. If your wife would die, what ever is in her will may be able to transfer her ownership share..but all may depend on how originally this property came into the hands of those on the LLC. If it was part of a trust, inheritance, and the LLC is tided to that you may have other things that need to be determined.

All depends on how the LLC was drawn up.

Thank you for your reply. Actually my question about passing my wife's share to my daughter was meant to ask if my wife's being a shareholder in the LLC prevented the LLC from using the maintenance and improvements as LLC expense would transferring her share to our daughter allow it.

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