Trying to help out my folks

[Russ B]

I'm in a position where I can help my parents financially but I don't think handing them over a bunch of money is in anyones best interest. I was thinking about buying a few rental properties and having them manage them and let them keep the rental income that is left over after expenses. (They have experience as landlords and Dad is very handy for small repairs) The questions I have are the following:

1. Any advice on how to structure this from a tax (income) perspective?

2. I would like to get mortgages on these properties, so from what I can tell an LLC probably isn't the way to go. Any other options?

3. Please feel free to share any other relevant thoughts/advice.

Thanks,
RB

[Jon Holdman]

You're really talking about two separate transactions here. One is owning rentals and the other is hiring your folks as PMs. The income they make from managing them is pure income for them. An LLC doesn't affect taxes, unless you choose to have it taxed as a S-corp or C-corp. Depending on the income from the rentals and their insurance situation, a C-Corp might be helpful. Fringe benefits, including insurance premiums, can be deducted inside a C-corp. You would definitely want to consult a CPA.

Their income is an expense for you. Between your actual expenses, depreciation, and the money that goes to your folks, you will probably have passive losses. If you AGI is low enough, you might use those to offset other income. If not, you can carry them forward until you sell.

Or, you could treat all the income as income for you and treat the money that goes to your parents as a gift. I believe the limit is now $13K per person. So, you can collectively given them $26K without tax consequences.

You sure they're up for being PMs? You sure that's the best way to assist them?