Quit Claim Deeds and Business Tax

[Mischael Metelus]

Hi, I'm hoping someone could help fill in some knowledge gaps for me. I recently acquired a property through a tax lien and it has now appreciated in value. I've started my own LLC in South Bend Indiana and I'm planning on moving the property to my LLC as an asset so that I can leverage it for my real estate business.

I'm very excited for this opportunity, but I want to make sure I understand the potential downstream effects of the quit claim deed. While filling out the form i noticed that it asked for the valuable consideration amount of the property, my questions are as follows:

1. What happens if I put the valuable consideration at $1? 

2. Would I pay additional tax upon transferring to my company based on the amount I sold?

3. Would this be recorded on the properties sales records and affect future leveraging?

Any help would be appreciated.

Kind regards,

M. Metelus

[Mark Jones]

Hi Mischael! I am no expert on the tax piece, so I would highly recommend talking to a CPA, or even a title company may be able to give you better direction. However from my experience, The quit claim deed is mainly just for changing who owns title. Most people put the property in an LLC for more liability protection. If it is in your current name, if you do rent it out, you will have more protection with it being in the LLC vs. your own name. Indiana does not have tax transfer tax like some other states. Florida for example. So I don't think you would be liable for any additional tax, but again, please check with an expert. Don't want to give you any wrong info!

[Ned Carey]

@Mischael Metelus you really need to talk to a good acountant about this. I am not an accountnatn but here are my laypersons thoughts.

Why a quit claim deed? I see people here quick to use the term but a quit claim deed is usually a poor choice. 

A $1 transfer price could potentially mean you can claim no depreciation. What if you would only claim 1/27th of a dollar each year as deprecitation? 

If you transfer the property at the "basis" of the property then there would be no capital gain or loss, so no tax consequence. 

While it may be a good idea to transfer the property into your LLC for other reasons, that probably won't change how you can leverage it for your business.

Obviously check with a good accountant to verify anything I have said. You might also want to check with a lawyer abut legal consequences which can be differnt than tax consequences If you have a judgement for foreclosure but have not yet recorded your deed you may have an option to assign the judgment to your LLC.