I have a rental property and am going through a divorce. My wife will get our residence, and I'm interested in the rental house which is paid off and not currently under an LLC. I'm interested in listing the house and then buying it under an LLC. From what I can tell, this provides the following benefits:
- - Since my wife and I would split the cost of selling the house, she would be responsible for 1/2 the capital gains tax that would be realized (half would be about $22,000). If we just include the house in the asset split, I get credited for the appraised value of the house and capital gains is not being considered.
- - I would get to keep the house. I would have a mortgage on 1/2 sale price of the house, but the amount of the mortgage would be offset by the amount of assets I would get to keep during splitting of the assets. Essentially, it would be like a cash out refinance.
- - My assets would be more protected because my house would now be under an LLC. I've considered doing this for a while, but have just never gone ahead with it.
- - There is potential, I could get the house at a value below the appraised value, This would limit the gain from the sale, but the overall object would be to keep the house.
- - The cost basis and value of the house would be reset to the new value which would give me a higher depreciable amount each year on taxes and less capital gains down the road when I eventually sell the house.
Are my assumptions correct? And are there any downsides that I may be missing? I know there would be extra fees associated with listing and selling the house, but those would be less than what I would save on having my wife split the capital gains.
Thanks for any help,
Shawn
