LLC questions , TAXES,ETC NEWBIE QUESTIONS

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LLC questions , TAXES,ETC NEWBIE QUESTIONS

Nick Gee
Rental Property Investor · IL · Member since 2021 · 11 posts · 10 votes

hello everyone I finally decided to create an llc for my properties.. I have two single family homes.

STARTED INVESTING ALMOST 2 years ago

ONE IS RENTED, ONE IS BEING RENOVATED (POSSIBLE RENTAL)

I'm holding both in a newly created llc but I'm thinking of flipping one, my question is there a legal way to avoid capital gains ? also I want to purchase another property under the llc name but will this be difficult as a newly established llc ? 

Thanks in advance 

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Dave SpoonerPro Member
Rental Property Investor · Cincinnati, OH · Member since 2020 · 869 posts · 823 votes
5y

@Nick Gee Your best bet to avoid or defer capital gains would be to use a 1031 Exchange to invest in a new property. And using the LLC to invest is not impossible, just more difficult. You'll need to contact the right kind of bank to do it (most major banks won't lend in this manner).

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  • Dave SpoonerPro Member
    Rental Property Investor · Cincinnati, OH · Member since 2020 · 869 posts · 823 votes
    5y

    @Nick Gee Your best bet to avoid or defer capital gains would be to use a 1031 Exchange to invest in a new property. And using the LLC to invest is not impossible, just more difficult. You'll need to contact the right kind of bank to do it (most major banks won't lend in this manner).

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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Nick Gee, Your entity structure is more about liability mitigation and operational tax efficiency.  Entity does not avoid capital gains on the sale of real estate assets.  

    Like @Dave Spooner said, the way to indefinitely defer gains from the actual sale of real estate is using the 1031 exchange which allows you to sell investment real estate and buy investment real estate while deferring paying the tax after the sale.  Any tax paying entity can do a 1031 exchange.  So that won't hold you up at all.

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  • Anthoney Hanks
    Real Estate Broker · Forney, TX · Member since 2019 · 1k+ posts · 399 votes
    5y

    @Nick Gee, welcome aboard the BP community! Wishing you luck!

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  • Nick Gee
    OP
    Rental Property Investor · IL · Member since 2021 · 11 posts · 10 votes
    5y

    thanks guys appreciate it!

    1Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    4y

    @Nick Gee Whether to hold in an LLC is a personal choice with many pros and cons. My choice is hold in an LLC and every attorney I know holds in an LLC.

    If you are flipping a property you do not pay capital gains tax rates. It is considered earned or ordinary income. You pay the highest tax rate on that.  If you bought the property with the intention to flip it, I believe it does not qualify for a 1031 exchange. @Dave Foster  would be the guy to clarify that. 

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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    4y

    @Ned Carey, exactly right.  Since @Nick Gee said he had owned one for 2 years and was renovating one to be used as a rental I'm guessing he and his accountant feel ok with passing the intent test.

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