I am thinking of quitclaiming my rental properties from an LLC into my personal name. I'm wondering what will happen when I sell one of the properties. If the property was bought with the LLC's EIN number but sold with my personal SS # does the IRS need some documentation showing it was quitclaimed?
If you have a loan in a LLC and going to a personal loan. It is impossible unless you forgive the LLC. I a sorry to tell you that now you have tied your assets. I tell investors everyday not to do this! Now your LLC is liable no mater what. Never take a bite in an apple, unless you are willing to cut the apple tree down!
If it's a single member LLC, no prob. if it's a multimenber you have to quit claim into the personal name in the same % ownership of the LLC.
We own the property free and clear so that's no problem. The LLC is a partnership with my spouse and I'm just wondering how the IRS will be able to track the change from the property being purchased in the LLC (and thus with the LLC's EIN number) and eventually being sold with my (and my spouse's) SS#. Won't the IRS be looking for the sale to be matched up with the purchase. I guess it would be the same no matter what entity you were quitclaiming to to-I'm just wondering if something gets filed with the IRS so they know.
When you file your 1065 you put it on line 19b of Schedule K, Distributions of other property; and in box "L" of schedule K-1, where it reduces your capital account.
Chris
Thanks! If that's all I need to do that will be easy enough! Just want to keep the IRS happy....
Would you give us a little insight into the reasons behind transferring the property out of the LLC just to sell it?
Why not let the LLC be the seller? Isn't the tax treatment on the sale proceeds the same whether you or the LLC is the seller?
I'm not transferring the property out of the LLC just to sell it. In fact I don't plan on selling any time soon. At this point I'm only keeping the properties in the LLC for liability puposes but have decided a good umbrella policy may serve me just as well (I've been thinking of doing this for the past year but keep talking myself in and out of it). I know I'll eventually sell one of the rentals and I'm just wondering if the IRS gets confused when a property is bought with one entity but sold with another. I don't want to incur any unnecessary tax consequence. But it sounds like reporting the transfer on my partnership return takes care of that. Gotta go see the tax man next week anyway so I'll see what he says. Thanks for all your input.
It is my understanding that, as a general rule, contributions of capital assets to a business entity are done at cost basis, whereas, withdrawals of capital assets are done at FMV.
Ask your tax man and your CPA if the transfer to your personal name would be a taxable event. If the transfer is at FMV and you have an appreciated asset, then the business entity will have a taxable capital gain.
Again, I wonder why you want to take the property out of the business entity. What is the business entity not doing for you that holding in your own name will do better?
[ Edited by NewKidInTown3 on Date 02/28/2008 ]
NKIT3, thanks for pointing out the fact that pulling assests out of the LLC may be a taxable event. I guess I thought if I could quitclaim property into the LLC without tax consequences that I could quitclaim them out the same way. It seems it may be more complicated than that. As to why I am thinking of getting rid of the LLC.....when I laid off a few years ago I decided to fix and flip property for a living. I knew I was going to have to operate as a business and formed a partnership LLC with my spouse. No sooner had I formed the LLC than I was offered a dream contract position with my old employer (tell me I can make my own hours and I'm there). I still wanted to invest in real estate so kept the LLC and put rental properties in it. Since we don't need to be a business to invest in rentals I was thinking of ditching the LLC and just getting a really good umbrella policy for the liabiltiy aspect. At this point I'm thinking of just leaving the two rentals we have in the LLC and putting any new ones we pick up in our own names. If we ever sell the other two rentals then I'll dissolve the LLC. Of course, that's the plan this week.......