Selling rental at intentional loss

I want to sell an investment property at a loss this year so I can claim 💯 percent of my losses that exceed my revenue on the others. But want a paper loss only. I also don't want to pull down the fair market value of the community either. Could I sell to my LLC at fair market value but then gift of equity let's say idk maybe $40k or so and then add to my cost basis? That way I can have that reduced overall income I'm seeking but yet not have a below market sale that will pull down that real estate market for my neighbors that own in the community and of course when my LLC sells for a profit in a year I don't have much employment income.

M-MTax
Level 10

Investors & landlords

Sounds borderline fraudulent. Be careful.

Investors & landlords

What you are proposing sounds a lot like  income tax fraud at the very least ... since  you are selling to a related party which is yourself disguised as an LLC.   Consult a tax attorney before  you do something incorrect.  

Investors & landlords

selling to your LLC is selling to yourself.  there would be no economic substance to the transaction which would result in the IRS taking the position it never took place. as others have said - see a lawyer. this doesn't pass the smell test. 

 

Investors & landlords

Oh boy I don't want to do anything fraudulent at all. 

Carl
Level 15

Investors & landlords

Typically, a single member LLC is considered a disregarded entity by the IRS. So selling something you already own to your LLC, is basically selling to yourself. Doing that is not a recognized transaction by the IRS, regardless of the price.

Hal_Al
Level 15

Investors & landlords

Only $3000 of a capital loss can be applied against ordinary income*, in the year of the sale.   The excess is carried forward to future years.

 

*There is no limit on how much of the loss that can be applied against capital gains (long & short term), including  capital gains distributions.