Refinance in LLC to a different partner

[Prashant Sheth]

I have a partner in an LLC that owns my property. The mortgage note is in my name

What are the implications of refinancing the property in the partners name? Is that same as sale? What are the tax implications? And how does this show in the LLC/personal tax? Thanks for your response In advance

[Andrew Postell]

@Prashant Sheth lots going on here so I'll try to answer these one at a time:

1. If the LLC is on the deed/title then that LLC owns the property. Now members of that LLC own the LLC, but legally speaking, the LLC owns that property.

2. If you filed a lien on the deed/title for this property then you have a lien position in the home.  You do have some rights but most of your rights would kick in if the borrower of that note does not pay you.

3. Now, ownership and lending is kind of a separate thing. In theory, someone could be responsible for that loan that has no ownership in the property. So transferring that property into an individual's name is entirely possible. And all members of the LLC would need to sign away their rights to the property in order to do so. You can absolutely do this when refinance the loan, but again, legally, this is a separate act. You could even do this without refinancing the loan.

4. if you do want to refinance the loan, the borrower needs to be prequalified first.  The loan type and lender will tell us what the tolerances are for refinancing the loan itself.

5. And there aren't any tax implications here since the property is not being sold.  At least one interested party is staying on the ownership so this doesn't trigger any monies changing hands.  If you made interest on the loan, that is income you should claim, and that it taxable and you owe the lienholder a 1098 at the end of the tax year for the interest that he/she paid you.

*WHEW*  Hope that wasn't too much information but hopes this helps in some way.

Thanks!