Asset Protection & LLCs

[Shaun R.]

Hello Everyone.  Forgive me if this has been covered, but I am a new member.  I have a property that is personally owned (by husband & wife) and mortgage free/unencumbered.  The property has increased in value substantially since it was originally purchased (was Homestead property for 30+ yrs).  

I want to transfer it to an LLC in order to gain the limited liability protections (husband & wife will still be the owners/members of the LLC - no other new ownership interests involved, or $$ being exchanged). The property in question is going to be used as a rental income property, since it is no longer the Homestead.

My question is: If I simply transfer title to a LLC (via Quit Claim Deed), will such a transfer be considered a taxable event which triggers Capital Gains taxes?  

[Melody E Bergloff]

@Shaun R.

If you and your wife create a LLC and are the sole owners of the entity in which you transfer cash and/or property without receiving anything in exchange for the transfer, you will not create a taxable event.

However, the basis in the property will take a "carryover" basis. In other words, the basis will be the same basis that you had in the property before the transfer. Hence, there will be a built-in gain implications when you dispose of the property. In addition, have you thought about how the LLC will be taxed as (i.e. partnership, s-corp, etc.)?

I would definitely reach out to a CPA that can help you handle this transaction because there are other issues that you may or may not have considered.