All Forum Posts by: Pat Williams

Thank you. That is very helpful. That is correct, the "main" LLC is the SMLLC.

1. There are strategies to segregate the land held long-term/as an investment and the development as ordinary income, correct?

2. The mere changing of the entity does not avoid the dealer status? I would have thought that all activity would then be classified as ordinary once the entity is a corporation and there would be no distinction between capital gains/investing and ordinary income/development. So C/S-corp simply does not take away the dealer status?

3. The investors of the project are currently LLC members taxed as a partnership. As currently constructed without precautions for dealer status, all income is probably ordinary income. Is there a way to protect the investors of the development project? Or if you invest in a RE development venture, you will also be subject to the dealer status as well? Could this be mitigated by the investors creating a corporation, depending on their tax bracket?

Thank you.  That is correct, the "main" LLC is the SMLLC.

1. There are strategies to segregate the land held long-term/as an investment and the development as ordinary income, correct?

2. The mere changing of the entity does not avoid the dealer status?  I would have thought that all activity would then be classified as ordinary once the entity is a corporation and there would be no distinction between capital gains/investing and ordinary income/development.  

3. The investors of the project are currently LLC members taxed as a partnership.

Where are my blind spots in this tax organization for a real estate developer. A single member LLC (Company X) runs rentals, RE development, and is General Contractor on the development of the properties. The rentals need to move out of this LLC.

Now the Development projects are LLCs taxed as partnerships with the main LLC as the general partner.

1. Is there any way around dealer status for RE Development for this kind of operation (buy land, develop houses, sell to individuals)?

2. Company X is thinking of changing to a Corporation. This would eliminate the dealer status and only leave the taxation of corporations, correct?

3. The partners of the development would need to find their own ways of avoiding dealer status or are they protected since they are limited partners?