Discussion:Is it best for a single member LLC, with one rental property, to file a 1065 or 1040 Schedule C

Who is that owner? A natural person? A C-Corp? An S-Corp? A partnership? An LLC taxed as any of the above?

You are all confusing single member with real live natural person. T'ain't neccessarily so.

Or I'm missing something?

I'm sure I saw this question already, but unfortunately I paid too little attention to it, because I didn't understand the issue deep enough. Sorry, but can I have a rental property in already existing corporation. The scenario is: I do have an s corp, and I built a couple of houses. Now I rent them out, and issue myself K-1. What is wrong with this picture? And if there is nothing wrong with this picture, why I can't open an s-corp for the same purpose... or some other, and buy this rental property?

Secondly, the reason most people recommend against putting RE in a corporation (S or C) is that RE is an appreciating asset. So if/when you want to get the RE out of the corporation, it is a taxable event with negative tax consequences.

Please educate me as to what I am missing about what the problem is with having RE in an S corp.

Thanks.

Obviously, there will be times when RE inside an S corp, or (JR, pleeeease forgive me for saying this) even a C corp, makes sense. But the general rule is that for most individual clients and their closely-held corps, keep the RE out of the corp.

LL for LLCs works quite well - but much better when the LLC is not a SMLLC.

I don’t have experience in RE tax at all. A friend of my has $200K+ income and rental property on Sch. E., though the RE losses don’t adjust her tax. Her accountant told her to place RE into LLC, because it would be better for tax purposes. I’m trying to make sense out of this statement with a combination of what Jdugancpa says (which makes much more sense to me) . But as of now, I see the only benefit from LLC : liability. I don’t see how LLC or S corp can adjust tax. Also, it is a very important question for me, because I’m going to have rental RE soon, and shame on me if I do it wrong.

Discussion:Change_from_a_C_corp_to_a_LLC

I recommend clients obtain liability insurance wherever possibly AND form limited liability entities, but many don't seem too interested in taking my advice with regard to the insurance.

I don't agree with your statement on stepped up basis of s corp upon death with real estate. Wouldn't indirectly through the valuation of the stock the inheritor get the stepped up basis.

If it is decided that a husband and wife want to buy a commercial buidling in Massachusetts and own it jointly.

1) Can they file as a sole member LLC because they are married? (Or would they have to file a partnership return and let it flow to p2 sch E on 1040 through the 1065 k-1)

2) and if they can file as sole member LLC how would you report it for tax purposes? WOuld you report the activity on page 1 of schedule E? Wouldn't the LLC need a fed ID # and where would that go on p.1 sch E.

lastly lets say the husband just wanted to own it himself and wanted a sole memebr LLC how would you report it. p1 sch E ? what about the fed ID # does it need one? and where would it go on tax return

Thanks in advance

but your general question, which I think is "if RE in an S corp is bad, why isn't RE in a partnership bad, too" may well be covered in the top section of that category page, indirectly. Good luck.

I would encourage you to read material that is more professional than the IRS Pubs. Even if you don't have an extensive library, you can piecemeal one together by searching your topic on the web. Here's an example:

http://www.nysscpa.org/cpajournal/1997/0497/features/f30.htm

As a general proposition, property distributions out of corporations are a taxable event. This is not the case with partnerships. This is one reason why a partnership is superior to a corporation. That is just a general proposition. There are pros and cons to each, but moving property in and out of a partnership is far more tax efficient than using a corporation. Take, for example, a property contribution. Corporations have a control requirement (80%)...partnerships do not. A partnership is the *Cadillac* of business entities, by far, hands down. The question is: Does the client need a Cadillac, or can he accomplish what he wants to accomplish with a Honda?

Had a call earlier today. Accountant wanted to flip a client over from a partnership to an S-corp, would save FICA you know. I helped plan the setup of this entity, so I'm intimately familiar with it. Money partner was dad. Intangible contributors were kids and in-laws. I informed accountant that once the bank debt is paid off in a few years, which is guaranteed by dad, and once the lease runs out, also guaranteed by dad, dad will be redeemed out and dad won't be guaranteeing anything any more. Dad will have a big gain when he is redeemed out...and partnership will have a big 754 adjustment...and my feeling is that kids/in-laws will remain in this business to reap the full benefits of the amortization deductions. You don't have this opportunity with, say, an S-corp.