(if you can't take a slight loss find every deduction you can in the book and record the items and then sell the property to lower your taxable liability.)Then take those proceeds and use it to pay off the other 2 properties!

Then they plow the highly taxable business income into owning real estate assets which are separate of course from their sales company.So the money keeps flowing in and they locate awesome deals to partner on or hold the cash for when they find the right deal themselves.RESIDUALS is the name of the game.

A good CPA will hopefully help you to offset the income so its not taxable. 

All you are doing is moving money from one pocket to the other and creating a taxable situation and more money for yourself.

If the building owner LLC (lower tax bracket) is receiving "income" from a tenant LLC (higher tax bracket) who claims it as an "expense", then he is using this false relationship to artificially transfer the rent amount from a higher bracket taxable income to a lower bracket taxable income.I'm no accountant, but I also thought LLC's had pass-through taxation so I could be completely wrong.I don't know if he is presenting significantly misleading information though. 

Is this money taxable separate from the rent income?

Doesn't an active participation in RE allows you to reduce your taxable income produced from your rental loss including full depreciation dollar-by-dollar? 

From a tax point of view, if this is not fair market rent, the IRS could disallow any rental losses on this property and/or increase your taxable income upon audit.If this is way below fair market rent, you'll need to report the rental income on it as though it were fair market.  

All you are doing is creating a taxable occurence which only costs you money.

For a business owner with $100,000 taxable annual income, the net tax savings for using an S Corporation instead of an LLC in taxes paid every year can be as high as $7,500.Holding PropertiesWhen holding properties as a cash flow investor, the LLC (or LP) is generally the better choice because an LLC has more liberal distribution rules.