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ronqureshi
New Member

Transfer of rental property to LLC

I transferred a rental property from myself to my own texas LLC. The LLC is designated as  a disregarded entity, and to my knowledge does not need a 1065 return. Turbotax (personal return)  asks me if I sold/disposed of this rental property. What should I say?Thanks

3 Replies
Carl
Level 15

Transfer of rental property to LLC

Your transfer to a single-member LLC (or two member LLC if both members are married and filing a joint return) changes absolutely nothing what-so-ever, since the IRS sees your LLC as a disregarded entity. You still report your rental income & expenses on SCH E.  Unless you have non-rental related income/expenses in your LLC, you have nothing to report for your LLC and a SCH C is not required.

SweetieJean
Level 15

Transfer of rental property to LLC

This article may be of interest:
<a rel="nofollow" target="_blank" href="http://budgeting.thenest.com/tax-consequences-transferring-property-limited-liability-company-33711....>
Carl
Level 15

Transfer of rental property to LLC

I've routinely seen where folks put a rental into an LLC, yet they either do not transfer title of the property to the LLC, or they discover after the fact that the lender will not allow it. If they don't transfer the title, then the LLC has no assets - thus there's nothing to "protect" with the LLC. On top of that, it still does not change the fact that the tax reporting does not change, as it's still reported on SCH E - not SCH C.
Additionally, in some states (Florida being one) it's extremely easy for a claimant to legally circumvent the LLC protection.
For "real" protection, an S-Corp should be formed "after" you have the lender's permission to transfer title to the S-Corp (in writing of course). By going that route, it's also possible to set things up as a IRA too, thus building a retirement nest egg faster than any other investment could ever hope to legally. But if you go the IRA route, consult with an attorney and have them set that up for you. They'll charge a few grand. But in the long run it will be worth it. If you try doing it yourself and make even one teeny tiny mistake, the IRS won't catch it (quite conveniently for them) until you reach retirement age. Then the fines and penalties could easily wipe out any hopes of retirement.
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