All Forum Posts by: Zehua Zhou

I just set up my solo 401k under uDirectIRA, and the LLC that will be 100% owned by the 401k, and ready to buy real estate using the LLC.

My question is regarding taxation. 

Should I give my LLC's EIN number or my 401k custodian's EIN number to the property manager? They will still issue me 1099-MISC forms. That form clearly shouldn't be issued against my own SSN. uDirectIRA sent me an instruction to use their trust company's EIN and address. I wonder if the tax forms would be mailed there, and then that trust company will file to IRS to explain it is tax exempt? Or will it be issued against my 401k's EIN and I'll just ignore these forms?

Same question for the Bank account, as the bank needs to issue the 1099-INT form. 

I talked to a business attorney and she said she wasn't sure how taxation works here and wants me to do thorough research.

I just set up my solo 401k, and the LLC that will be 100% owned by the 401k, and ready to buy real estate using the LLC.

My question is regarding taxation. Should I give my LLC's EIN number or my 401k custodian's EIN number to the property manager? They will still issue me 1099-MISC forms. That form clearly shouldn't be issued against my own SSN. If it is issued against my 401k custodian's EIN, will they do something about it, and file to IRS to explain that this is tax deferred? Or will it be issued against my 401k's EIN and I'll just ignore it?

Same question for the Bank account, as the bank needs to issue the 1099-INT form.

As you know, for the conventional loans from Fannie and Freddie, you can only get them if you borrow the loan yourself when you buy a single house or 2-4 units for rental. Then if you want LLC as asset protection, you have to transfer the property to the LLC to hold the title. But you cannot change the loan's borrower name. It will still be you. So the question is whether this setup can be pierced by the corporate veil during a lawsuit.

 Yeah this is what I have been thinking but the asset protection attorneys kept saying oh there is risk here and I need to understand how much risk there is.

I think one concern would be mold, which is not covered by hazard insurance. If the court is really crazy, it could hand a win to tenants, even if the tenants have never mentioned the mold problem before. But I need to know how likely it is. Of course, i understand that the attorney wants to make money so they will likely use scare tactic to get clients.

I currently have a few single houses for rent which are directly under my name, and also the mortgages are under my name.

I am considering to move the houses to an LLC 100% owned by me. But I don't think the borrower for the loan would change, so that means each month, my tenant would pay rent to ABC LLC account under my property manager, and my property manager would distribute the funds to my sole prop business account, and my sole prop business account would pay the mortgage.

Will the tenant have a case to argue that I am commingled with my LLC?

Note: A more complicated way would be to also setup a business account under the LLC, and have my property manager distribute the funds to that business account. But the lender does not allow loan payment from the LLC business account because the name of that account does not match the borrower (me). So I would still have to move funds from that business account to my personal account before I pay the mortgage each month. But even if they do, the tenant could still argue that I am the one who borrowed money to finance the real estate so i am commingled. What do you think?

I currently have a WA LLC, with myself being the owner and manager. As a result, in a public search, the governor name would be me.

If I set up a Wyoming LLC and modify the Operating agreement to have my WA LLC to be 100% owned by my Wyoming LLC, I assume I would still have to list a natural person as the governor of the WA LLC, and my name would still show up there. So would this extra layer give me any help?

If I set it up this way, then the monthly distribution would go to the Wyoming LLC's business account first before going to my personal account, which is fine but another layer of trouble. Also some extra logging and annual fee.

Does this give me any extra benefits? For example, is the charge order protection only valid in Wyoming but not in WA LLC?

Thank you. I asked my IRA Custodian but they were not sure how to answer this question for me.

 Thank you! I decided to go with the solo 401k route and not worry about this tax.

 Thank you. They said it is a no because it is a conditional non-recourse clause.

Freddie Mac do offer commercial non-recourse real estate loans. It usually requires a much larger down payment, like 50%. And it will put your name on it as the non-recourse guarantor, which turns into recourse under certain conditions like committing crimes on the property, failing to pay prop tax or insurance..

 Thank you for the clear cut answer!