Real Estate Broker Rental Property Pluses Minuses in LLC, S Corp or Schedule E

[cbusa]

From a tax aspect what are the pluses and minus for a real estate broker (who qualifies having 750+ hours year) having their rental properties in an LLC vs S Corp vs Schedule E?

Are all 3 ordinary income loss? 

[cbusa]

If a real estate broker transfers a rental property that is on schedule E to an LLC are there capital gains taxes? What about S Corp? Does ownership % factor?

[pk · Accepted solution]

@cbusa , 

(a) strongly suggest having a discussion with Tax professional and / or an attorney both in the state where the properties are  and/ or where the business is established/ incorporated.   The properties will generally be under   the state law of where situated taxed as instate /sourced income.

 (b) The need to file Schedule-E is dependent  ( for federal purposes  )  on whether the properties are grouped  or individual and also on the character of the holding entity.  Generally  one owner LLCs are considered a disregarded  for tax purposes ( based on how it chooses to file its return )

(c) Note that as an active source of income, the PAL ( Passive Activity Limitation  ) does not apply -- NOL does apply.

(d) The veil protection/ limitation of liability  for an LLC is not as strong as that of a C-Corp but the paperwork  for tax filing for an LLC is minimal

Therre are many more ands/ifs/buts  and therefore strong suggestion  to consultation ( as mentioned above ).

Please feel welcome  to ask specific questions here .

pk