Next there needs to be some research on possible capital gains, and to see if your grandmother can use the primary home exemption to avoid paying taxes on the profit  up to $250K if single, and $500K for married. 

@Dave Toelkes  I just saw your first post... duh, can't believe I didn't think of the 2/5 year primary home exemption.

The only problem is that the taxes on the LLC (income) is reported in the K1's for the members, so you kids may get a K1 from the LLC.Don't think the state where you register the LLC will exempt you from income... 

After two years you get the tax exemption and don't pay long term capital gains on a personal residence sale right?

The only 2 ways around will be to owner occupy with the homestead exemption, or own property that is zoned commercial.

Hey everyone,Does anyone know if  4-plexes in Oakland that are owner occupied exempt from rent control?

And he misses out on all the benefits of it being owner occupied, like tax exemption from capital gains because he doesnt actually own the property.I bet he isnt properly insured on the property either, because if he insured the property in the llcs namr, the lender would have been notified of the change in coverage.

After discussing with my accountant she was under the impression that we could sell one of the homes before the 2 year/24 months of ownership and no pay capital gains (and could use marriage as an exemption).

If you were to sell I'd only sell if you can qualify the sale for tax exemption or lessen the tax burden.

@Jim Macedon Two things would occur if you moved back into the house for two years or more, then sell.1) yes, you have to declare All the depreciation you previously claimed/could have claimed.2) You will Not get the full 121 exemption.....you have “non qualified” use.