Discussion:Tax treatment of a transfer of real estate property from one LLC to another LLC
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Discussion Forum Index --> Advanced Tax Questions --> Tax treatment of a transfer of real estate property from one LLC to another LLC
Discussion Forum Index --> Tax Questions --> Tax treatment of a transfer of real estate property from one LLC to another LLC
Dacowles16 (talk|edits) said: | 26 May 2008 |
| I have a client that has several LLC's for investment in real estate and he recently transferred some properties owned by one single member (SM) LLC (which was set up as a C corp) to another SM LLC -- How do I record the sale since the same taxpayer is the single member of both LLC's. Secondly the C Corp LLC transferred a property back to the original owner (Mortage note of $39,000 and net tax basis of property is $16,000) -- does this trigger a gain on sale? | |
RoyDaleOne (talk|edits) said: | 26 May 2008 |
| Dave if an LLC is treated as a C Corp I recommend that you do [not] refer to the entity as an LLC because that creates confusion. It is a C Corp and I suggest that you think of it that way. Next, separate your client from the entities the clients owns.
I will be more responsive with my comments if you will repost the facts with a bit more clarity. | |
Dacowles16 (talk|edits) said: | 26 May 2008 |
| The LLC (seller) was setup up as a C Corp therefore the C Corp sold property to a single member LLC. Since the same person owns both LLC's there was no transfer tax assessed for Pennsylvania State purposes. I belive I have a gain on sale for the C Corp since Tax cost is well below the debt on the property. Thanks for asking for the clarrification RoyDale. | |
RoyDaleOne (talk|edits) said: | 26 May 2008 |
| Yes, I think clearly there is a gain. | |
| 26 May 2008 | |
| The "sale" is at fair market value. Better to treat transfer of property and debt assumption separately in this case to cover cases in which debt may exceed market. Probably should liquidate corp./llc. | |
| 26 May 2008 | |
| I'm not so sure it's a sale..could be reorg or distribution since they are related entities. | |
Southparkcpa (talk|edits) said: | 26 May 2008 |
| DA
The transfer of the property from the C Corp back to the individual will trigger taxable gain at the corporate level AND dividend income to the individual. IAs an example, f building has basis of 16K, FMV of 100K and mortgage of 39K , the taxable gain is 84K. Then, when the asset is distributed out, with the mortgage I presume, the dividend will be 61K (100K less the mortgage). perfect reason why C Corps should never hold property. | |
| 26 May 2008 | |
| I inherited one like that. Only corp had potential $1mm gain. We had owner sell property through 1031 exchange for 10 smaller properties. We had him liquidate those over 10 years, structured management fees & eventually got money out with less damage. Had him set up DB plan & funded about $85k per year. Client is happy. | |
