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Discussion:Sale of a hotel held in a California LLC

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Discussion Forum Index --> Tax Questions --> Sale of a hotel held in a California LLC


Jt (talk|edits) said:

2 March 2007
I am a real estate broker in California and am currently involved in the sale of a Central California hotel property. The seller just informed me that he will only sell the LLC to the buyer for the tax savings. THe buyer says that he is not interested in purchasing the LLC. I am trying to get a grip on the advantage to the seller of selling the LC over a straight real property and business sale.

Glmpllc (talk|edits) said:

2 March 2007
how is the LLC taxed?

Kevinh5 (talk|edits) said:

2 March 2007
how is the LLC being taxed? As a single member LLC disregarded entity? As a partnership? As a corporation? As an S-Corporation? The answers will be different depending on the way the LLC is set up to be taxed.

Jt (talk|edits) said:

5 March 2007
The LLC is taxed a a C Corp with 4 stockholders

Kevinh5 (talk|edits) said:

5 March 2007
By selling the member's interests in the LLC taxed as a C corp, the members will pay capital gains tax on the difference between what they realize and their basis in the LLC/C corp (which could be a big number if they contributed cash or property to the LLC or a very small number if the LLC/C corp borrowed to build or buy the hotel).

If they (the LLC) sold the building, section 1250 depreciation recapture is taxed at 25%, then the LLC/Corp would pay income taxes on the rest of the capital gain, and then the owners will have to pay taxes on their share of any money they get - either as dividends or as salaries or as a liquidation of their membership interest.


Let this be a lesson to never let a client buy real estate in a corp or LLC taxed as a corp. PERIOD.

JR1 (talk|edits) said:

March 5, 2007
And a lesson to future posters that we would normally presume that when you say LLC, we figure you mean 1065...maybe I should just start assuming that there any number of goofballs who like to check boxes for no GOOD reason.

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