All Forum Posts by: Josh Prince

@Jacob Song If you live in Los Angeles, and you and your family are planning to stay here, you will likely end up paying California tax on your income whether you invest in Los Angeles or Las Vegas. Maybe take that out of the equation if you are California residents. 

@Joe Robinson - congratulations on getting through it!  What in particular did the IRS focus on - you mentioned they were interested in your being a RE professional... What information did they look at closely?  Is there anything that you will do differently going forward based on this?  What about some things that you were glad that you did that may have saved you some hassle??  Any tips for the rest of us?

@John G. - It is possible to transfer your property to an entity and not trigger reassessment but there are a number of technical requirements. It gets harder when you have a partnership with someone else and you both want to preserve your tax base.  There are a number of lawyers in California  who specialize in structuring these transactions in light of prop 13.  

So to answer your question, it is feasible and it has been done before.

@Scott Esmail - I agree with @Roy N.  - This is not double taxation.  Double taxation would be when you have to pay US income tax and then also Canada income tax and you don't receive a credit for your US income taxes. You are just effectively paying you Canadian tax rates.  Cross border taxation is very complicated, most developed countries like the US and Canada have sophisticated systems to ensure their residents pay taxes, and you are not likely to be able to achieve your goal of not paying Canadian taxes on Florida income while a Canadian resident. 

@Benjamin Chavez - Unless you elect otherwise, a single member LLC is disregarded for income tax purposes (a disregarded entity). this means that as far as the IRS is concerned any transfer of property between a disregarded entity and its owner is not a transaction at all. Not a gift and not a sale. There is no tax effect and no reporting required to the IRS.

@Mindy Jensen - I would like to take a look at the table of contents before buying and I am sure many other members would as well.  Can you please link to the TOC or list it? Thanks!

@Chris Penny - Not sure if you are looking for more, but the truth is that as an LLC is typically taxed as a disregarded entity or partnership depending on the number of members. This means that the owners pay tax as though they earned the income directly themselves. There is not an obvious income tax benefit. You will pay the same taxes. There may be some secondary issues, such as fewer audits on LLCs than on schedule C or M of a 1040, but that is probably not what you are looking for.

Does that resolve the issue for you?

I have seen a number of different situations take place. Sometimes particularly unethical agents have a seller who they have convinced to sell under market (or perhaps the seller doesn't know any better). Those agents either take it themselves, or are only willing to sell it to someone who lets them double end it - or even, in some cases, I've seen agents demanding a piece of the deal. in other cases, the property is listed on the MLS, but the buyer will ask the seller to double end it in hopes of getting their offer pushed through over other offers. In almost all of these cases it does the seller a disservice because the agent may not be taking the strongest offer, but instead the one that lines the agent's pocket the most.

You have to check local law for the details, but in general, a partial owner of real property may bring an action in court to have the property sold.  At that point, it is a public sale.  Anyone can buy it.  Here is an example that ignores transaction costs (legal costs & selling costs - which of course may be significant enough to kill the deal.. but that's for you to decide). 

E.g.:  You think the house is worth $100.  you buy 50% of the house for $30.  You then bring a partition action and there is an auction style sale.  Let's say the bidding gets to $90 and you have the option to pay $100 for the house.  At that point, you can buy it for $100 and get the entire house, as well as 50% of the payment= $50 in cash back.  Net investment is $85 for the whole house.  Or, you can let someone else buy it for $90, in which case you receive $45 for your 50% interest - a $15 profit.  Again, you will have to consider the legal and selling costs which will eat into and may eliminate your margin, but you can see how buying half a house at a discount can set you up to realizing a profit, or obtaining the whole house.

This is all relatively theoretical, as it is very rare to be able to buy a partial interest in real estate.  I've seen a few, but usually the other owner of the property will be willing to pay more than a third party to acquire the seller's interest. Also, depending on local law, a partition action may be something that any owner can do automatically, or the other owner may be able to defend and contest the action.

Sounds like a good opportunity to buy half the house at a discount, and then sue for a partition action, which is a court ordered sale. You might get a deal on the whole thing.  That is assuming that they the seller does not force you to sign a waiver of partition rights, or has already signed and recorded one on title.