Property in Longboat Key, structure is messy. Need advice

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Property in Longboat Key, structure is messy. Need advice

Allon Isaacman

Member since 2026 · 1 post · 2 votes

Hi Everyone

My father owns a single family home in Longboat Key, Florida which he rents out.

When he initially purchased the property he put the property in an LLC with him being the sole shareholder.

He then decided to convert the company to a C Corp with him still being the sole shareholder.

Obviously this is not a great structure for both taxes and asset protection.

It was bought in 2003 and has recently been extensively renovated including bring the roof and windows up to code for insurance purposes. There is a substantial unrealized gain.

How could this be restructured for both tax efficiency as well as asset protection?

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Chris SeveneyBusiness Member

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

2mo

Corporation will provide asset protection. You will need a cpa to understand the entire situation but it may be best not to remove it from the corporation if the value has increased significantly.

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Ken M.
Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
2mo
Quote from @Allon Isaacman:

Hi Everyone
My father owns a single family home in Longboat Key, Florida which he rents out.
When he initially purchased the property he put the property in an LLC with him being the sole shareholder.
He then decided to convert the company to a C Corp with him still being the sole shareholder.
Obviously this is not a great structure for both taxes and asset protection.
It was bought in 2003 and has recently been extensively renovated including bring the roof and windows up to code for insurance purposes. There is a substantial unrealized gain.
How could this be restructured for both tax efficiency as well as asset protection?

That's actually a complex situation that requires either a CPA or an EA. The IRS would be happy with any incorrect answer. They make more money. ;-)
A CPA or EA will take into consideration the complications of ownership, maintaining records, tax write offs, estate planning, and goals.

There are several people here capable of helping, not just opinion hacks. Just make sure anybody that answers is qualified to give solid advice.
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Stephen David Smith Jr.Business Member
Real Estate Broker · Sarasota, FL · Member since 2016 · 157 posts · 65 votes
2mo
@Allon Isaacman
Give Berlin Patten Ebling a call; they can help you out here. If you would like a warm intro, let me know.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2mo
Corporation will provide asset protection. You will need a cpa to understand the entire situation but it may be best not to remove it from the corporation if the value has increased significantly.
7e investments53 Reviews
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
2mo
@Allon Isaacman, you're right, a C Corp holding a single rental property is generally one of the least favorable structures for real estate, you lose the step-up in basis benefits an LLC or direct ownership would give heirs, and getting the property out of the C Corp now (whether through liquidation or a sale to a new entity) is going to trigger tax at both the corporate level and again personally, that's the classic C Corp double taxation problem, and it's especially painful here given the property was bought in 2003 and has a substantial unrealized gain built up over 20+ years.

There's no way to move this into a better structure without recognizing at least some of that gain, the question is really about minimizing the damage and doing it deliberately rather than by accident. A few things worth exploring with a CPA: whether an installment approach or spreading the transition over multiple years could soften the tax hit, whether the built-in gains rules and any remaining double-tax exposure can be modeled out precisely before doing anything, and once it's out of the C Corp, restructuring into a properly set up LLC (potentially with a holding/operating split, land trust, or umbrella insurance layered in) makes a lot more sense for both tax treatment and liability protection going forward.

Given the size of the gain and how long this has been sitting in a C Corp, this is really a situation where you want detailed projections before pulling the trigger, since the order of operations and timing can materially change the tax bill. Worth connecting with a real estate-focused CPA to actually run the numbers before deciding anything.
Happy to connect!

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- Ken M.
  Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
  2mo
  Quote from @Ashish Acharya:
  
  @Allon Isaacman, you're right, a C Corp holding a single rental property is generally one of the least favorable structures for real estate, you lose the step-up in basis benefits an LLC or direct ownership would give heirs, and getting the property out of the C Corp now (whether through liquidation or a sale to a new entity) is going to trigger tax at both the corporate level and again personally, that's the classic C Corp double taxation problem, and it's especially painful here given the property was bought in 2003 and has a substantial unrealized gain built up over 20+ years.
  
  There's no way to move this into a better structure without recognizing at least some of that gain, the question is really about minimizing the damage and doing it deliberately rather than by accident. A few things worth exploring with a CPA: whether an installment approach or spreading the transition over multiple years could soften the tax hit, whether the built-in gains rules and any remaining double-tax exposure can be modeled out precisely before doing anything, and once it's out of the C Corp, restructuring into a properly set up LLC (potentially with a holding/operating split, land trust, or umbrella insurance layered in) makes a lot more sense for both tax treatment and liability protection going forward.
  
  Given the size of the gain and how long this has been sitting in a C Corp, this is really a situation where you want detailed projections before pulling the trigger, since the order of operations and timing can materially change the tax bill. Worth connecting with a real estate-focused CPA to actually run the numbers before deciding anything.
  Happy to connect!
  
  Just curious, in his situation, would selling it on a lease/option make any difference for when the taxes are due? Such as paying taxes only on the portion paid each year?
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