All Forum Posts by: Matthew McNeil

I came upon this recently and wanted to share it because I'm not seeing it in other posts.  

The Bipartisan Budget Act of 2015 effective January 1, 2018 requires all LLC partnerships to adopt a Tax Audit Agreement.

Bullet points;

The BBA and the IRS regulations promulgated thereunder apply to all LLCs and partnerships taxed as partnerships beginning January 1, 2018. This article explains why all LLCs taxed as a partnership must adopt an agreement in their LLC Operating Agreements that contains appropriate BBA language.

The Act creates a new default audit regime that applies to all partnerships unless a partnership is eligible to elect out of the regime and makes the election. Under the new default audit regime, the IRS generally will conduct audits and make any resulting adjustments at the partnership level, and if the IRS finds a deficiency, it will impose tax on the partnership itself (rather than on the partners) at the highest individual or corporate tax rate in effect for the year under examination.

The Act replaces the “tax matters partner” with a partnership representative, who need not be a partner but must have a substantial presence in the United States, to assume sole authority to act for the partnership in an audit.

Partnerships composed of 100 or fewer partners and whose partners do not include any partnerships or trusts may elect out of the new regime. The partnership must timely make the election annually on its partnership return, and must notify all partners of the election. The rules require the partnership to report to the IRS the name and taxpayer identification number of each partner, including each shareholder of any S corporation that is a partner.

Sources; 

http://www.keytlaw.com/oa/partnership-tax-audit-ag...

https://www.lexology.com/library/detail.aspx?g=e6c...

https://mcdonaldhopkins.com/Insights/Blog/Tax-and-...

Marc,

Thanks much for forwarding me a copy of your OA.

Really appreciate it!

Matt

An update to my previous post regarding Thurman's question after talking to my laywer.  He said;

As with a trust, lenders do not exercise the "due on transfer/sale" clause when real property is transferred to the same individuals in an official capacity. Typically, the same applies to LLCs where you and your wife are sole members.

Thurman, initial question: will your bank allow you to deed the property to your LLC? Have you reviewed the terms of your loan? Most lenders won't allow this as far as I know.

Jerry, you asked why people are considering such a level of asset protection. Its coming from Clint Coons YouTube videos, which I'm sure you've seen, as discussed on another Bigger Pockts post; "Anderson Business Advisors." His foundational premise in promoting the WY LLCs is threefold; maximize taxes, create anonymity and the need for "charging order protection." The WY LLC is identified as the manager of the LLC (in place of the real owner) registered in the state where the asset (investment property) is located. Very open to your advice. Is this necessary? Thanks!

Clint Coon’s (Anderson) videos are very informative!  The one thing I appreciate is that he explains everything in detail.  I’m not sure why it’s necessary to spend so much money to have a company (or individual) set up what’s he’s advising.  I think people get overwhelmed with all the information and determine its best to pay someone else to do it…

For example, I did everything on my own. I have 3 residential properties in Idaho, each set up in a separate LLC. I did it all from overseas where I live (as an American) using the Idaho Secretary of State on-line portal identifying my friend who lives in Idaho as my "registered agent" who mailed it in for me. Cost me $100 each LLC. I then applied for IRS EIN # online and had it done in 5 minutes. Secured "Certificate of Existence" from Idaho Sec. of State via their on-line portal for $11 (downloadable pdf) which I then sent as an email attachment to my bank to open the new LLC business bank accounts.

Mr. Coons advises setting up a WY LLC (for anonymity and "charging order" protection). So, I went onto the WY Sec of State website and saw 64 pages of "Registered Agents" listed. I'll review these name with the BBB and others sites then pick one. Happy to pay the $20-$200 fee for their service, and confirm they will do what I need. Setting up these LLCs (in the state where the asset is located and WY) is not difficult.

However, the area I'm feeling unfamiliar with is how the taxes are structured with the WY LLC. Mr. Coons advises setting up the WY LLC as a "partnership," which prepares a 1065. The anonymity protection that WY LLC provides as a holding company files a 1065 in its name and pays you via a K1. It doesn't require you to report those earnings on a SCH E.

This is the only reason I’d seek out Anderson’s service. But I feel confident I can eventually figure it out on my own without having to pay thousands of dollars.