Investors & landlords

I have some more thoughts for you below. I don't understand this enough to give you a definitive answer. The I&D tax for entities has been hard to understand. Perhaps you should seek the advice of a NH attorney or CPA (who does this all the time not now and then). Should only take a half hour consultation. I quick google will get you several lawyers who have written articles, especially when the state modified the I&D law to clearly tax LLCs distributions that were not reasonable compensation. (You might be able to reduce your distribution by reasonable compensation, but for a rental property as opposed to an operating business, I would think that would be minimal.)

RSA does not talk about distribution from the profit but only the interest and dividends.

But by definition a dividend is a profit distribution from an entity. In addition to Rev 901.09, see the first google definition of dividend "a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves)."

So I would ask isn't your distribution described in RSA 77:4 III or IV?

It seems to me that your LLC is paying you dividend when makes a distribution and that appears to be taxed unless an exemption applies (like return of capital, i.e. not a profit distribution).

     Rev 901.09  “Dividend” means an amount of property distributed, with respect to their ownership interest, other than in liquidation of the organization, to shareholders or interest-holders of an organization from : (a)  Current year profit; or (b)  Accumulated profits of such entity. 

What is confusing to me in the 901.09 is that  it specifies only property distribution but not cash distribution but at the end it says current year profit or accumulated profit. My understanding is that property distribution is different from cash distribution.

For most purposes in tax law there is no difference between property and cash distributions. Property has more issues (basis, how to value, etc.), but the basic idea is that you can't take cash and buy, say, a car and distribute the car and get out of paying a tax. 

Also cash, legally, is personal property.

I am totally confused now between RSA77: 4 and 901.09 

One thing that might help, if you don't already know, is that legally the statutes (RSAs in NH) are a high level description of the law. The agencies promulgate more detailed regulations to flesh out how the statute is going to work.  E.g. the statute might say an annual tax return is required. The regulations might say it is due on April 15 and the required form is the XYZ-NN. The regulation is binding law unless someone challenges it in court for being contradicting the statute (or other reason) and wins. Or the agency changes it.

Also note that instructions are not law.  Instructions cannot change the law. The statue and regs (as interpreted by administrative or court cases) are law.