Can a LLC gift equity? - Posted by HR


#1

Posted by HR on November 15, 1998 at 09:36:50:

nt


#2

Can a LLC gift equity? - Posted by HR

Posted by HR on November 11, 1998 at 20:21:36:

Here’s the scenario: I make a personal loan to my LLC, my LLC uses the money to become the legal owner of a property. Can my LLC gift equity to a buyer? I understand that there is a $600K lifetime limit on an individual doing this; is there any limit for a LLC, S Corp., etc?

Thanks for any info. I’m looking for creative ways to provide seller financing that won’t come back to bite me in any way.

HR


#3

Re: Can a LLC gift equity? - Posted by J.Hyre in Ohio

Posted by J.Hyre in Ohio on November 14, 1998 at 08:36:04:

While I haven’t run into or researched this issue, I offer the following FREE thoughts (so take them for what they are worth):

  1. If you sell to a third-party (e.g.- not yer Dear Auntie), the IRS usually respects the deal. For example, if you sell a property worth $50,000 for $40,000 and you have an adjusted basis of $30,000, you have $10,000 gain and the buyer has a basis of $40,000 in the property. The buyer also has $10,000 in “equity” if the property is in fact worth $50,000. The real issue for buyer is persuading other people (e.g.- banks) that the property is in fact worth $50k if he only paid $40k. The IRS will assume that the property is worth $40k, the price paid in an arms-length transaction.

  2. The issue gets much more complicated if you sell to a relative or provide below-market rates of interest. At that point, a gift may exist. Remember that every individual may give $10k worth of gifts per individual per year tax-free. If married, that equates to $20k in tax-free gifts per individual per year.

  3. A gift by a corporation may treated as a gift by the shareholders. A gift by an LLC or partnership is treated as a gift by the owners.