Funding LLC

[Delfin F.]

Hi,I have a question concerning how I can fund my investment .I plan on purchasing a rental property soon but I'm concerned about tax implications.My plan is to set up an LLC in order to loan that LLC the money to purchase the rental property.After that I plan on rehabing the property and than acquiring an equity mortgage on the property to repay the first loan which i made to my LLC.I have a few banks that are willing to loan to my LLC with my personal guarantee.Are there any tax issues that I should be aware of ?

[Stephen Chittenden]

You should talk to a CPA, but assuming that you are the only owner of the LLC, I don't think so. The IRS won't believe that your LLC exists and will ignore it. Accordingly, I don't think you would have any interest income form the loan to the LLC (it's like your left hand loaning your right hand money). This does seem more complicated than it needs to be. You can just contribute money to the LLC. I don't know why you would want to use a loan for this purpose. Unless you actually record a mortgage against the property, the bank isn't going to "pay off" that loan directly anyway. (Doing that would result in more taxes and fees, so I don't know why you'd do that either.)

The answer would obviously differ if you had partners.