transferring rental property to college going son

[Craig Sutta]

I have a rental property in my hometown that I bought 5 years ago and is generating good income. Its fully paid off. For tax purposes, I want to transfer this property to my son (student 18 years – going to college 2000 miles from home). He can use the income from the house for college tuition & he can travel back hometown to manage the house. House has 20% appreciation & I have taken 5 years of depreciation in my taxes. I get W2, he works summers & has a small income to report in his 1090 in the year.

What is the best way to structure the sale, so we can optimize for taxes during sale & future (next 3 years when he will be studying):

• 1)Should I transfer 100% to him (deed transfer – should sale price be $1?)
• 2)Should I & him jointly own it 50/50
• 3)Should I set up an LLC (NOT trust) that owns the house & we both are partners in LLC?

[Richard Sherman]

@Craig Sutta You NEED to talk to an estate attorney ASAP and probably your accountant or you could be setting yourself up for some serious gift tax issues.  LOVE the idea, though you would be missing out on the stepped-up basses possibly, but it is worth talking to an attorney about it.