How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lev Your Own Question
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29483
Experience:  Taxes, Immigration, Labor Relations
870116
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

Situation: Capital aportation of real property to an LLC. The

This answer was rated:

Situation: Capital aportation of real property to an LLC.
The house has a FMV of $500,000 and a basis of $300,000.
The house was held as an investment, for occasional use and did not generate any rental income.
The LLC's sole member is the presnt owner of the house and is considered a disregarded entity for Federal Income Tax Purposes.

What are the tax implications federally: Does the LLC have to withhold anyhow the regular 10% rate on the Fair Market Value of the house? I understand that a capital aportation to an LLC considered disregarded is not a taxable event.

What are the tax implications in the state of California: I understand that the "disregarded" status is not so for state income tax purposes, so will there be a taxable event (FMV-Basis)? Withholding?

Thank you.

LEV :

Hi and welcome to Just Answer!
While the LLC is a disregarded entity - that is true for both federal and CA state income tax purposes.
The fact that the LLC is subject of ADDITIONAL CA franchise tax doesn't change that fact - income realized by the LLC is still passed to the owner - and the owner would be responsible for income taxes as if that income is received by the owner directly.
There is no income tax withholding when the property is transferred from the person to the LLC which is owned by that person.


Such transfer is not a taxable event and doesn’t trigger any income tax liability.

Customer:

Thank you very much once again,

Lev and other Tax Specialists are ready to help you