How to report initial contribution to smllc

[Mdlle8899]

Hi , how do I report my initial contribution  to irs if I trf my own house to my smllc in tx? We do not have state trf tax.  But is contribution is taxable event if I trf my house to my smllc?  And how do I report my next contribution to my llc? What are tax consequence? And what are the basis of the house?

For instance, if I inheriate a house via death deed in tx,then I trf the house from my name to my smllc, what are tax consequences n basis of the house? And what is the basis if my llc sell the house later?

My second q is: will distribution from smllc be taxable event? If i sell my house under my smllc, what are tax consequence n what are my basis?  And can I put rental income with my personal account n pay to buy new house to be under my smllc  or for personal use? 

My third q is about series llc. What are tax consequences if I trf the house from series 1 to series 2 under the same master llc? Internal trf real property tax consequence.

• My fourth q is about joint tenancy with survivorship.  What are tax consequence if I inheriate the ownership of the house which I jointly own with my parent,who pass away now. Do I need to pay tax after I can take my parent's ownership of the house once she pass away via joint tenancy with survivorship ?
• My 5th q: what are non taxable co tribution n distribution to smllc n from smllc?
• Thank you all so very much.
• Sincerely,
• Pei kuo

[KimberW]

For federal tax purposes, a single-member LLC is considered to be a "disregarded entity". That means, essentially, that it is just you.

When you transfer property to an LLC, your basis in the property is considered to be the amount of your contribution to the LLC. Remember that you are essentially transferring the property to yourself -- as the sole owner of a disregarded entity. Transfers between yourself and your single member LLC will generally be non-taxable events. The basis won't change with transfers in this scenario -- whether you transfer property in or distribute property out. Any taxable event will happen when the property is sold.

You won't report contributions, as such, to the IRS. Your LLC will keep track of contributions, distributions, income, expenses on its books. From that information, it will prepare financial statements (income statement, balance sheet) for you to use to prepare your tax return. A single-member LLC reports its information on the owner's personal tax return. On a Schedule C for self-employment income; Schedule E for rental income; Schedule F for farm income, etc.

The basis of the house depends on how you acquired it. If you purchased it, then the basis starts with the purchase price. Add any capital improvements and subtract any depreciation and you'll (generally) have your current basis in the purchased house. If you inherited the entire property, then the basis is generally its fair market value on the date the estate was valued. And, if you owned part of the property as a joint tenant and then inherited the remaining part, the basis will be a combination of the two. Please review IRS Publication 551 - Basis of Assets for more details.

If your LLC sells the house, the LLC will have profit in the amount of the sale price less its adjusted basis in the property. This may not be the same basis that you transferred the property in with -- if the LLC made capital improvements or took depreciation on the property, for instance.

That profit will be passed through to you and reported on your personal return. Whether it counts as short or long-term capital gains, and whether you would qualify to exclude any part of the gain as the sale of a personal residence, depends on facts that can't be known until it is sold.

Your share of income from an LLC is taxable to you when the LLC reports the income whether you take a distribution or not. For instance, if the house is sold in 2025, you'll report that gain in 2025 -- even if you don't take the money out of the LLC until 2026 (or ever).

It is best to keep your business and personal finances separate. Rental income from a property that is owned by an LLC should be deposited into a bank account that is also owned by that LLC. An LLC only limits your liability if people respect the boundary between you and the LLC. If you don't respect that boundary by keeping separate finances, then it makes it harder for you to demand that other people respect it.

I can't answer your questions about Series LLC -- those are more legal questions than tax questions. Not all states allow this structure (although Texas does) and the state laws vary. It is most important that this is set up correctly. Find a business attorney in Texas who can advise you on the setup of the LLC(s) and advise as to how to keep the financial records for the entities to maintain the separate liability.

The publication I linked above discusses the basis of inherited property. I cannot advise as to whether there would be any kind of inheritance tax or estate tax due. Generally speaking, there is no federal income tax consequence to inheriting real estate. Your basis in the inherited portion of the house is "stepped up" to the fair market value on the date of valuation of the estate. But you will need the estate administrator, or an estate attorney, to assist in telling you when that valuation date is and what the fair market value is. An appraisal would be a good idea, if the executor did not already have one done.

That same publication also addresses non-taxable exchanges and other kinds of transfers -- such as gifts, transfers between spouses, changes from personal to business use or vice versa.

In general, however, contributions of property to an LLC are not taxable events. Distributions, also, are generally non-taxable events. Profits (losses) are reported when they happen, not when distributions are made.

I hope that this helps -- but also strongly recommend that you reach out to an experienced local business attorney who can fill in the gaps on the legal questions that you asked.