LLCS/TAXS - Posted by TOM-KC


#1

Posted by Bud Branstetter on October 15, 1998 at 12:38:49:

Ann,

You may not want to HOLD long term real estate in your corporation. Use the corporation for flipping or other business activities. If you did an LLC that is acting like a partnership keep that separate from the business entity.


#2

LLCS/TAXS - Posted by TOM-KC

Posted by TOM-KC on October 14, 1998 at 22:00:37:

CAN ANY ONE TELL ME?

IF YOU OWN REAL ESTATE WITHIN YOUR LLC BUT YOU ALSO DO ALOT OF FLIPPING, WILL YOU STILL BE TAXED BY SELF EMPLOY ON THE FLIPPERS?

THANKS


#3

Re: LLCS/TAXS - Posted by Bronchick

Posted by Bronchick on October 15, 1998 at 09:35:58:

An LLC is either taxed as a partnership (2 or more members) or as a “non-emtity” (reports on you 1040). Thus, any income earned by “active” activities may be subject to self-employment tax.

Consider using a separate c-corp for “flipping”


#4

Re: LLCS/TAXS - Posted by Jeff (Dallas)

Posted by Jeff (Dallas) on October 15, 1998 at 13:02:57:

Bill,

My understanding is that as of January 1997, an LLC with greater than 1 member can elect its choice of entity classification with the IRS. ie/ the LLC can chose to be taxed as a corporation or a partnership.

This seems to remove the tax advantage of a traditional C-Corp over an LLC taxed as a C-Corp.


#5

Re: LLCS/TAXS - Posted by Ann(HI)

Posted by Ann(HI) on October 15, 1998 at 11:24:53:

There is probably a very obvious answer, but I’m stumped. I’ve set up a corp. Now, what’s the process I go through to get my houses (3) into the corp? Can I just deed them over? Won’t that trigger the due-on-sale clauses I have on two of them?


#6

Re: LLCS/TAXS - Posted by Bronchick

Posted by Bronchick on October 17, 1998 at 10:14:14:

Not really; even though an LLC could theoretically be taxed as a C corp, a disregard for “corporate” form in terms of documenting meetings may result in disallowance of agressive deductions.


#7

Re: LLCS/TAXS - Posted by Bronchick

Posted by Bronchick on October 17, 1998 at 10:15:21:

The transfer is done by deed. If you are concerned about the due on sale provision, ask the lender to waive it, or do it discreetly using a land trust (see my article on this site for a complete description of this method).


#8

Re: LLCS/TAXS - Posted by Jeff (Dallas)

Posted by Jeff (Dallas) on October 15, 1998 at 15:31:58:

Deeding to a Corp. would trigger a due on sale clause, but deeding to a trust (with you as the beneficiary) would not. After you do this, you could then decide to quietly assign the beneficial interest to your Corp… Read Bill Bronchick?s article on this site for a detailed explanation

…But, as Bud said, for tax purposes, you probably would not want to use your Corp. to hold the interest in your RE anyway; LLC’s and Limited Partnerships are the preferred entities for this. Find a tax specialist who?s competent in RE taxation to help you structure this to best suit your needs.