(Loan paydown, tax savings, etc etc..).

In doing so, bear in mind that the cost and admin of a corporation is higher and that the tax treatment is different:1.

Do we 1st do tax on the LLC and whatever we split 50 & 50 then each claims on their taxes ?

According to our understanding:1) California does not recognize REP status, but we could claim it on our federal taxes, is this correct ?

@Jeanette LandI always recommend using a tax professional.

@Bradley Buxton makes a very good point to make sure to do your due diligence as you won't be an owner occupant like your in-laws.Last bit of advice: Because this is a friendly deal, you want to take your time to make sure you structure it in a way that maximizes tax and cashflow benefits for both parties. 

Note that the diagram doesn't consider tax implications—that's another important factor you'll need to include in your decision.

This is the BEST $100 you will ever spend, and if you listen to Amanda Han's tax book, you'll know it's also likely a business expense for you to write off :) https://biggerpockets.supercast.com/My perfect way to learn from the BP books is to listen to the audio book through the subscription above, then books that really stand out to me I go old school and get the physical copy so that I can re-read it, take notes in the margins, and put post it notes so key points are easier for me to re-reference in the future.

In that case you might save taxes building with them.

Remember you are exempt from excise franchise tax if you file an exempt form.This post does not create a CPA-Client relationship.