Using wife's condo as rental property

[Andrew P.]

Hello, question for anyone who may have insight on the best strategy. 

Wife and I recently married. I started a LLC before we were married in preparation to start owning rental properties . It's a sole proprietorship.We
we want to use her condo as a rental

For tax purposes we plan to file separate every year because of her high student loans. 

Question:  Do I  need to add her to my LLc to use her condo as a rental? If so how will that affect our tax returns if filing separate?

Can I keep the LLC as a sole proprietorship and just report it on my tax return?

Will the LLc need to be converted to a partnership and corporation as a separate entity?

Appreciate it.

[Bill B.]

@Chris John

You’re turning $100’s of thousands in tax free gains into taxable gains. 

If you sold and rebought the identical condo in the same building your cost basis would be the new higher cost, so you’ve captured all the gains tax free.  I would never do it, I’m just showing what a bad idea keeping a property with tax free appreciation as a rental is. (Ps what are the odds it’s the rental you would buy if you didn’t already own it? Maybe not 0%, but pretty close.)

I’m also saying it could cost them $50 or $100k in additional taxes. Something that could take 10 years just to break even compared to selling. And that doesn’t even count the additional income they would make from putting the tax free gain in a 5+% CD. (Heck, that alone would probably provide greater returns than that rental.)