Discussion:Principal Residence owned by multimember LLC?
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Discussion Forum Index --> Tax Questions --> Principal Residence owned by multimember LLC?
| 15 June 2007 | |
| OK. Here’s what I’m trying to accomplish:
Here in Ohio, just as with most everywhere else, a homeowner can execute a Transfer on Death deed to a named person or persons. There are certain apparent limitations though. You can’t, for one, have a property be Joint and Survivorship AND Transfer on Death. So without an expensive trust, you can’t have a couple complete their avoidance of probate planning until the death of the first (make sense? Property starts as J&S and then has to be changed to TOD-assuming they want it to pass in equal shares which is another issue.) However, under Ohio law, you can designate securities as J&S AND TOD. Further, the TOD doesn’t necessarily have to go to named beneficiaries, as you can designate “To Son, lineal descendants per stirpes.” So, after all that background, I was considering forming an LLC to put the house into, as in Ohio you do not have to have a business purpose for an LLC, and then writing the shares as discussed above. But the question is, what are the tax effects of doing this? Can you still get exclusion for sale of principal residence? Mortgage deduction? Energy credits? With regard to the exclusion, from the regs (§ 1.121-1(c)(3)(ii)) it looks like this would only work if it’s a single member LLC. Any thoughts? | |
| 15 June 2007 | |
| Sounds like what you are likely to end up with is a lot worse than what you are trying to avoid. There are sites like this for attorneys. You might try one of them. ♫ | |
| 15 June 2007 | |
| well, there is the new rule for multi-member LLCs where the only members are spouses that will be effective next year. (Not sure how this works in Utah with those of Mitt Romney's persuasion) | |
| 18 June 2007 | |
| Kevin,
Could you point me to the text of what you're talking about? Thanks. Dennis, I'm making it sound more complicated than it is. We're talking about a product that would probably be $300-500 and save somebody's estate $2500-3000, plus speed the sale of a house by 3-6 months. | |
| 18 June 2007 | |
| Small Business and Work Opportunity Tax Act of 2007 | |
| 18 June 2007 | |
| The question seems to be can you torture an LLC to substitute for a trust in some vague attempt to save money. Still sounds silly to me. Since there seems to be no recognition of the cost of LLC annual filings I would doubt that the other estimates are accurate. Trusts are not particularly expensive and if the house is all there is, probate can probably be avoided. | |
| 18 June 2007 | |
| Diz, I think I get what you're trying to accomplish (after reading your post a few times) -- i.e., probate avoidance w/out use of revocable trusts.
I'd be hesitant to be the "new kid on the block" in creating new types of probate avoidance arrangements. Use of trusts might be more expensive at the outset, but they're proven to work and you have a generally well-formed body of law in trusts. Do you have that w/ LLCs? Do you know what rules govern in case of disputes and what fiduciary rules apply to whoever that may be? And even if you form an LLC to transfer a principal residence into, are you going to have to draft a detailed operating agreement? Is that going to be just as time consuming as drafting a trust agreement? Most likely, no one really knows if IRC 121 will apply with a personal residence held in an LLC. W/ revocable trusts, we do know the answer. I'm on board w/ Dennis -- I think you should stick to what's known until what you're thinking of is proven. Good luck though, what you're talking about is interesting. | |
