Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.
If you buy the house, and hire his company to do the work, you will get the entire gain on the sale of the property and he will have income from the work done on the house.
Are you saying this is the beast way to go?
I think the best way is to buy in an LLC
and split the profits
Are there any drawbacks to this course of action?
And what are the benefits of having an LLC?
The benefits are liability protection for one
There's really no drawback. It's the most common method to doing what you are setting up to do
Another way to minimize tax is hold the property for at least 1 year
This will put you in a lower capital gains tax rate ... 15% if you are in the 25% and up tax bracket and 20% if you make over $400K per year
If you are in the 10 to 15% tax bracket long term capital gains rates are 0%
If you do the LLC, you will have the same type of tax return as if you have no legal entity and split the profits...either way you fill out form 1065
The tax bracket of the LLC is your tax bracket
Your share flows to your tax return
If you move money in and out, that will impact your capital account
Yes, you can deduct your travel expenses...mileage, etc
No, if you hold longer than one year you would have a favorable tax rate
If you do pay him to do work, pay him at arms length and he will have income equal to what you pay him
just like any other job
meaning you pay him what another non-related customer would pay
You have a capital account...which is what you have invested in the company
you put money in, that adds to it. Take money out that reduces it
You can do whatever you want...as you go, or after the sale
Is there anything else I can assist you with today?
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Does the house need to be in the llc name or can it be in my name or does it matter?
If you have the LLC it would be in the LLC's name