Your entire gain on your first property could all be seen as taxable capital gains.

If you paid your llc, disregarding your son and his lower bracket, your expenses/write offs would be no different, but any “profit” going thru your llc would become taxable as ordinary income (with SS/med taxes) as opposed to the passive rental income it is now. 

As you point out, there are numerous transfers that are not taxable events.This would be a transfer for purposes of dissolving a partnership.

The 2 of 5 rule would be met, but my question is whether IRS considers the sale of vacant land (that I'd no longer be living on) 'part of' a home/residence sale, or would just exempt the very small amount I might receive from selling the manufactured home.For what may or may not be a relevant comparison, if I sold the contents, fixtures, etc of my house before I sold the actual house, I'd imagine the contents sale would be taxable, but the sale of land and structure not.

The great thing about depreciation is it can help lower your taxable rental income so you'll owe less (sometimes no) taxes on the income from rentals.Best of luck!

The 2 of 5 rule would be met, but my question is whether IRS considers the sale of vacant land (that I'd no longer be living on) 'part of' a home/residence sale, or would just exempt the very small amount I might receive from selling the manufactured home.For what may or may not be a relevant comparison, if I sold the contents, fixtures, etc of my house before I sold the actual house, I'd imagine the contents sale would be taxable, but the sale of land and structure not.

Hi @Caleb Franks, If you did not do a prior 1031 Exchange into these properties and your combined taxable gain is only $10,000, you may not want to worry about doing a 1031 Exchange. 

Otherwise you’re turning hopefully $100’s of thousands of tax free income in to taxable income in one of the least landlord friendly states possible as they make the move towards even less friendly. 

This is incorrect based on what the original poster is asking.Rentals do not have to show a taxable profit on schedule E.

Properties with leverage have better net tax savings because paper depreciation losses typically wipe out any taxable income.