All Forum Posts by: Mike S.

Originally posted by @Ashish Acharya:

@Mike S., 

In addition, by making an election under Section 754, you can take depreciation on the stepped-up amount.

Would that mean that you restart the 27.5 year depreciation at year 1 with the new step up value?

I am a little bit confused about step up basis.

It is my understanding that when you die, your property transfers to your heirs with a step up value to the current market value, so if they sell the property for that same new market value, there is no capital gain.

What is happening, if they are keeping the property? Do they start depreciation from year 1 with this new value, like if they just bought it for that new value?

Now if the property was held into an LLC. If instead of transfering the property, it is the LLC that is inherited. In the book of the LLC, does the purchase value of the property stay the same with the same depreciation as before? Is it the contribution from the new owner that is recorded with a step up value?

Would it not then be more advantageous to transfer the property out of the LLC to the estate at the time of death, then transfer the property to the heirs directly? Or I am missing something?

You could transfer your property to your LLC without triggering the due on sale clause by using a Land Trust.

Transfer the property to the Land Trust where you will be the beneficiary. Then assign your beneficial interest to the LLC later on.

@Julio Salado In general LLC has nothing to do with taxes. It is supposed to be tax neutral. In fact it may even create some more tax return complexity but should not increase nor decrease your tax. LLC are mainly used for liability and asset protection. They are also used when you are investing with other people in the same project. LLC will also increase your paperwork and bookkeeping, and make obtaining loan more difficult. As a whole LLC are great tools to use in real estate, but you need to understand first their pro and con as it is not the magic bullet solution for every situation.

For anonymity, especially with a WY holding LLC, I would strongly suggest to use completely different names for each sub LLC.

Originally posted by :

You can transfer properties into an LLC, but it is a taxable event. That means that if you buy something for $1,000 and your transfer it to an LLC at a time when it is worth $10,000, you will have $9,000 worth of taxable gain. I think. That used to be the law. Check with an accountant about that one.

I don't believe that is true. You may have some fee for recording the new deed and also if there is a note attached.

However, if you are still the beneficiary of the LLC, it is a contribution to the capital of the LLC and it is tax neutral. Depreciation continues as before, on the same basis. Same if later you take the property out of the LLC back to you.

The only time you will get taxes is when you'll sell it (except on a 1031 exchange).

No it is not necessary, it is up to you to decide on the cost/benefit of such a structure. Depending on the equity that you have in the property, you may consider an LLC as an asset protection tool. You will still need liability and umbrella insurance.

For me, after analyzing my situation, I decided to go with one LLC per property with a holding LLC and a property management C corp. Some will consider it too much, some will say that I should have add some other layers. Again it all depend on what will make you sleep better at night.

Seriously, the entry level real estate license is very easy to get and not expensive. You can get it in one long week of work with an online course.

With your license in hand you will show commitment and have much better chance to work for a broker.

Please do not post the same questions multiple times.

https://www.biggerpockets.com/forums/531/topics/629630-tax-lien-properties-llc

@Mike S. Thanks, that was going to be my next question referring to Michael Plaks sock & shoe example, which order should they go. So you are saying the Trust should own the property and the LLC owns the trust?

watch

https://www.youtube.com/watch?v=37YMkbMBrLI&index=...

The Land Trust is the owner of the property. The LLC will be the beneficiary of the Land Trust.