We bought the house for $540k cash
- We renovated it for $85k+ (it was a complete dump)
- We expect to sell the house for $700k
- We expect to pay $35k closing costs
- We expect a profit of $40k
Question: When transferring the deed to our LLC, should we choose 'gift' or should we specify a transfer value? If we specify a value, we will will have to pay transfer tax of $1.10 per $1000.=====>>>>>>>>>> Transferring your property over to your LLC is doable even in cases where a mortgage already exists as long as the appropriate measures are followed. Transferring a real estate title to an LLC doesn?t transfer the mortgage. You personally are still obligated to make the mortgage payments on time. Your LLC is a legal entity and may accept it as a gift, however you and your spouse, the MMLLC members , would be actual owners of the gifted property ; so even the gifted property will be titled to the MMLLC the gift would be considered as made to you and your spouse, the MMLLC members. (I mean you guys need to report the gain on the sale of the home on your 1040 nOT on form1065) Then you need to file form 709 with the IRS. In general, you need to obtain a quitclaim deed form from the register or recorder of deeds in the county where the property is located. A quitclaim deed is a simple form designed to transfer property, and you can use it to transfer title from you, an individual. to your LLC. Also,selling the house to your LLC appears to be ok as long as you are not looking to file for bankruptcy protection any time soon. Otherwise, the sale to your LLC might be considered fraudulent transfer if you sell the property to the LLC for less than the FMV of the property and if you currently owe debts that have not been paid.
needless to say, You must be prepared for tax consequences when you transfer your property to your LLC; Though your LLC is a pass-through entity, and therefore does not pay taxes itself, it can pass on higher taxes to you and your spouse , the LLC members, as a result of the property transfer. when the LLC sells the property at a later date, the gains on the sale will be taxed. As said because the LLC doesn't pay taxes, you, LLC members , will pay the tax.so, Transfers of property into the LLC are free of IMMEDIATE tax consequences;taxes that would normally be due on gain built into the property are only DEFERRED
Our concern here is that if we choose to gift the house to the LLC, come time to sell the house (which is very soon), will the LLC be liable for the entire sale value as gain, since the LLC paid nothing for the 'gift'? If that is the case, can we still deduct all our expenses so that we pay tax only on the real gain ($40k)?======>>>>>>>> You as the owners of the home gifted to the LLC can deduct all the expenses on your 1040 when selling the home. your LLC is a pass-through entity, and therefore does not pay taxes itself, it can pass on higher taxes to you and your spouse , the LLC members, as a result of the property transfer. when the LLC sells the property at a later date, the gains on the sale will be taxed.
Note that selling in our names is not an option, has to be either through the LLC, or with my wife issuing me a quit claim deed. ====>>>>>>>>> for your LLC, to legally own the property, it must be titled in the name of the LLC. Placing property in an LLC is a process of ensuring the LLC is the recognized owner of the asset, but the manner in which this is done can have tax consequences for both you personally and the business.i guess it is up to you I fyou let your spouse issue you a quitclaim deed. You may some professional help[ from an attorney.
Reason for that is my wife is still not a US citizen, she is awaiting her green card. My wife and I own the LLC, with 98% being my share and 2% her share.===>>>>>>>>>>>>>>As she is your spouse she is treated as a US resident. The great thing about your MMLLC is that it offers the asset protection of ypur biz while at the same time giving you much more tax flexibility. For instance, as you?re the one of the owners of the MMLLC, you can generally choose to be taxed as though it were a rtnership This means that income and capital gains from the LLC will pass through directly to you and you?ll pay taxes as an individual. There?s no separate tax on the LLC, so you?ll avoid double taxation.