All Forum Posts by: Daniel Dunnigan

Situation: Purchased a piece of land in NY this year with 3 people (Dad, Uncle, and I). We paid for the property by taking a HELOC on my dad's house and using the cash to pay for land in all cash.

You may want to clarify for the sake of discussion. How did "we" (i.e. you, your Dad, and Uncle) buy the land by taking a HELOC on *your dad's* house? Did you and your Uncle own an undivided interest in your father's house? If not, it sounds a lot like we have a gift on our hands. Hopefully you discussed this transaction with your tax advisors. Gift tax returns are due April 15th.

Goal: Put the land into an LLC so that we can offset the $7,000 in income by the $7,000 in HELOC and tax payments to effectively show $0 in net income. This would result in us not having to pay any personal income taxes on the $7,000 in windmill income.

You're going to have an annual partnership return going forward, along with state and local returns. Whether or not the business has the scale to absorb this administrative overhead is something you need to examine (1065s are no longer DIYable IMO).

You really should consult a tax CPA and asset protection attorney to understand your options and the steps you're currently taking but don't fully understand the ramifications of.

The other two questions can wait.

Eamonn - Thanks for the reply. In terms of this being treated as a gift, I'm not sure.

My parents took out the HELOC and then bought the land using the cash but all 3 of our names are on the title (dad, uncle, and I). All 3 parties are now paying down the HELOC and once it is fully paid off we would each own 1/3 of the land. Regarding a gift, the land was purchased for $62,000 so even if were considered a gift I believe my uncle's share and my share ($20,000) would be under the gift exclusion amount of $28,000 (for mom and dad). The way we viewed it was, my parents technically owned the property outright and we were paying down a loan on the land financed through them rather than a bank.

Regarding the filing of partnership tax returns, one of us already has an LLC right now that currently has no holdings, no income, no expenses. We would all become partners in the LLC and transfer the deed for the property into the LLC. The LLC would then claim the income from the windmill and the "rent" payment for the HELOC. These would essentially net to $0 net income so rather than each of us having to claim 1/3 of the $7000 income, we would have pass-through income on K-1s from the LLC showing $0 taxable income.

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Hi everyone! Looking for advice on how to save on taxes. Thanks for your help!!

Situation: Purchased a piece of land in NY this year with 3 people (Dad, Uncle, and I). We paid for the property by taking a HELOC on my dad's house and using the cash to pay for land in all cash. We pay ~$7,000 annually towards taxes on the property and paying off the HELOC. An energy company wants to pay us $7,000 a year to put a windmill up.

Goal: Put the land into an LLC so that we can offset the $7,000 in income by the $7,000 in HELOC and tax payments to effectively show $0 in net income. This would result in us not having to pay any personal income taxes on the $7,000 in windmill income.

Questions/Considerations:

1) Can we take a rent expense for the LLC on the HELOC payments even though they are not in the LLC name?

2) If we did take this as rent expense, would my dad technically have to record that money as rental income even though its just automatically paying the HELOC?

Any suggestions/tips would be appreciated!

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All Forum Posts by: Daniel Dunnigan

Daniel Dunnigan has started 1 posts and replied 2 times.

Post: LLC Tax Savings for Land with Windmill Income

Post: LLC Tax Savings for Land with Windmill Income