Stepped up basis issue

[Jeremy Benezra]

As you may have seen in another of my posts, my wife and I recently moved out of the city and bought a house in the ‘burbs! I already owned the house we used to live in prior to meeting my wife. I recently quitclaimed that house into my single member LLC and turned it into a rental. It's appreciated in value considerably while I've owned it.

I know there is the 250k exemption on profits from the sale of your primary residence but that has to have been your primary residence 2 of the last 5 years.

I remember reading a BP post about how to have a property transfer count as a sale without triggering all the normal excise taxes and such.  I searched BP and learned a lot about stepped up basis but couldn’t find this exact situation.

Would the quitclaim from me being personally on title to my LLC being on title count as a transfer? If the LLC could take the property at a stepped up basis then way down the road when I sell the property I'd have a lower taxable income.

Is my understanding of the situation correct?  Is there a way to bend things in my favor?

Thanks!

[Michael Plaks]

@Jeremy Benezra

The strategy offered by @Ashish Acharya only works if it has been less than 3 years since you moved out of it. I don't think this is your case, but I'm not sure from your description. Also, his strategy is more complicated than his brief outline of it.

Sounds like you're planning to hold this house for awhile as a rental. If so, then you don't need to play games now. When it's time to sell, you can use a 1031 exchange to avoid paying capital gains on the sale. Not completely avoid, but defer indefinitely.