If you people would get off your high horse and look at the original question, I was merely asking about this more for possible tax advantages, and not so much about asset protection. Also as someone else who had a kinder response has said, for privacy. I am not paranoid, just greedy. I love these boards and get a lot out of them from everyone’s experience. I appreciate what Jimmy has said in his follow up and respect his opinion based on his obvious experience. I am not afraid of being sued as I am married to an attorney and know many who’s gig is not to ruffle feathers or act like a jerk. I do feel that chastising someone who is less experienced is a bit pretentious and arrogant. These types of responses will surely prevent a lot of people with far less experience than mine from posting. Maybe there should be an advanced guru only board where you have to have your schedule E approved before you may enrich the boards with your wisdom. I thought this whole thing was set up for people to exchange ideas, advise, and experiences and not just to pontificate.
I’ve searched the archives and seen a lot written about the downside of putting your own home into an llc, ie…losing the capital gains benefits,… A book I’ve read recently encouraged the llc for asset protection. My question is this…If my personal residence is in an llc, are all the expenses associated with the home not able to be used to offset income just as a vacant rental house would be?
Anyone know what the IRS has in mind to stop people from doing this?
We do plan on putting our home into rental in a few years, and as long as we keep it or do a 1031 exchange, the capital gains exception is not really an issue right now.
Just curious to hear what anyone has to say about this.
check NC law re: homestead protections. in TX, our homestead trules are WAY better than any protection a silly LLC could offer.
if you intend to use the house as a residence, and you want the LLC to be taken seriously in a lawsuit, you will have to pay fair market rent to your LLC. Are you prepared to do this? the rent is taxable to the LLC, and will come right back to your 1040. but the rent expense to you personally is non-deductible, because it is a personal expense. is that OK with you?
and yes, you lose the capital gain exclusion, which is one of the nicest things the tax code gives us.
what, precisely, are you afraid of? are you in a high-risk occupation (e.g. surgeon)? do you have known liabilities that are about to catch up with you>?
or are you fearful, in a general WAY, of being sued? if the latter, you are being PARANOID AND IRRATIONAL.
I wouldn’t use an LLC for asset protection, I’d use it for privacy.
If it’s a single-member LLC, even if you did pay rent it wouldn’t be taxable income.
No you don’t, not if it’s a single-member LLC. Of course you then have to show it’s your personal residence if audited. Unfortunately if you’re personally paying the expenses rather than using a nominee or alias your privacy is blown.
being called a drama queen hurts my …feelings…sniff, sniff…
your question has been asked and answered 20 times over the past few years. check the archives. the answer is the same each time. putting your personal residence in an entity is almost always a SILLY idea. I CAN show you one circumstance where it is not silly, if you care to be educated. see below.
for the most part, people on this board like my comments and experience. roughing up feathers is part of the gig for me, and if you don’t like it, too bad. you will notice that others are not taking up your cause. quite the opposite.
so here’e the free lesson, right from my law practice in the late 90’s. . [asset protection and advanced estate planning were my business]
wealthy 80 year old widow worth 20M. real estate represented 75% of the wealth, the rest cash and securities. a huge estate tax liability loomed. the residence, itself, was worth 4-5M. we transferred the residence to a family limited partnership (FLP), along with the other real property and half of the liquid assets. We made the lady a tenant in her own home, executed a lease, etc.
Then we transferred (partially by gift and partially by sale) 90% of the LP interests to a multi-generational trust set up for her kids, grandkids and beyond. Because of the way these LP interests are valued under the law, we were able to take 18M worth of assets, and effectively squeeze them down to about 8M. a HUGE tax savings for the estate. a very happy client.
If you people would get off your high horse and look at the original question, I was merely asking about this more for possible tax advantages, and not so much about asset protection. Also as someone else who had a kinder response has said, for privacy. I am not paranoid, just greedy. I love these boards and get a lot out of them from everyone’s experience. I appreciate what Jimmy has said in his follow up and respect his opinion based on his obvious experience. I am not afraid of being sued as I am married to an attorney and know many who’s gig is not to ruffle feathers or act like a jerk. I do feel that chastising someone who is less experienced is a bit pretentious and arrogant. These types of responses will surely prevent a lot of people with far less experience than mine from posting. Maybe there should be an advanced guru only board where you have to have your schedule E approved before you may enrich the boards with your wisdom. I thought this whole thing was set up for people to exchange ideas, advise, and experiences and not just to pontificate.