Skip to content
×
Try PRO Free Today!
BiggerPockets Pro offers you a comprehensive suite of tools and resources
Market and Deal Finder Tools
Deal Analysis Calculators
Property Management Software
Exclusive discounts to Home Depot, RentRedi, and more
$0
7 days free
$828/yr or $69/mo when billed monthly.
$390/yr or $32.5/mo when billed annually.
7 days free. Cancel anytime.
Already a Pro Member? Sign in here
Tax, SDIRAs & Cost Segregation
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated almost 7 years ago on . Most recent reply

User Stats

14
Posts
3
Votes
Omaree G.
  • Virginia Beach, VA
3
Votes |
14
Posts

Transfer title and tax

Omaree G.
  • Virginia Beach, VA
Posted
Hello! I just recently purchased my first buy and hold investment property. Currently, I am in the process of transferring/titling into my LLCs name. My first question, in your opinion and experience, what are some immediate issues and/or changes I may need to tend to or make, following the finalizing of the transfer., i.e., paperwork, legal issues, taxes, etc? Secondly, does the process of filing my taxes and claiming interest/real estate taxes paid, differ from that of my primary residence, considering it will be under the LLC name and will I run into any issues since the transfer was made from my name to the LLC during the mid-year?

Most Popular Reply

User Stats

3,854
Posts
3,158
Votes
Ashish Acharya
#2 Tax, SDIRAs & Cost Segregation Contributor
  • CPA, CFP®, PFS
  • Florida
3,158
Votes |
3,854
Posts
Ashish Acharya
#2 Tax, SDIRAs & Cost Segregation Contributor
  • CPA, CFP®, PFS
  • Florida
Replied

@Omaree G.

Congrats. 

If you are already in process of transferring, I am guessing this property is not financed, If it is, hopefully you are aware of due-on-sale clause. Some people want to play safe and not transfer into LLC if you have a personal debt

People transfer an asset into LLC for asset protection. So you have to follow some steps to make sure you are getting desired protection and keeping the LLC separate.

The entity needs to maintain its own books. To get the desired asset protection, you need to treat LLC as a separate entity. Don't pierce the corporate Veil:

  1. This can occur if the entity either is poorly capitalized.Inadequate Initial funding of the entity
  2. or fails to maintain a separate identity from its owners ( using the business bank account for business purchases, maintaining separate books)
  3. Conversion of entities Assets for Personal Benefit:
  4. Another factor that poses a risk of piercing the corporate veil is the draining of entities assets (such as payments of large salaries to shareholder-employees) that leaves the entity with inadequate resources to pay its debts.
  5. Do not commingle personal and LLC assets.
  6. Maintain a separate LLC bank account.
  7. Execute an operating agreement.
  8. Follow the provisions of an operating agreement.
  9. Have LLC member meetings according to the operating agreement.
  10. Title property in the name of the LLC.
  11. Maintain insurance on LLC property in the LLC's name.
  12. Sign all LLC documents in the LLC's name, not the members' names.

Although Single member LLC are more prone to failing the separation test, these steps will also provide a better defense against other creditors attempting to prove to pierce the LLC veil.

SMLLC does not file its own tax return, meaning it is disregarded for the tax purpose, so you will still report the rental activity at Schedule C of 1040. 

Interest and real estate taxes are treated as rental expenses and are listed on Schedule E rather than schedule A. 

It does not matter you transferred the property at the mid-year. All the activity for the entire year is eventually going to end up on Schedule E anyway.  You financials is not going to change because of the change of ownership. 

business profile image
Investor Friendly CPA®
5.0 stars
215 Reviews

Loading replies...