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We are buying a duplex with my father. He is loaning us all…

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We are buying a duplex...
We are buying a duplex with my father. He is loaning us all the money at a 5.5% rate, but he wants to be on the title. He needs the depreciation write offs. What is the best way to structure this transaction tax wise for him and us?
Submitted: 3 years ago.Category: Capital Gains and Losses
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6/17/2015
Tax Expert: PhillipB EA, Accountant replied 3 years ago
PhillipB EA
PhillipB EA, Accountant
Category: Capital Gains and Losses
Satisfied Customers: 704
Experience: Enrolled Agent with 8 years experience in tax return preparation, representation, and taxpayer consultation
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Thanks for using JustAnswer.com! I will do my best to provide you with a clear and concise answer to your tax question.
If I am understanding correctly, you are buying the duplex outright. Your father is providing the funding. However, he still wants to be on title in order to reap some tax benefits. Is this right?
The simplest solution would be that he treats half (or whatever percentage he wishes to own) of the money he pays as a mortgage to you. The rest would be treated as his cost basis in the property. On the tax returns, the income and expenses (depreciation, etc) would be reported on a pro rata basis according to your ownership percentages.
You could also have the property owned by a LLC. Each of you would be considered partners. However, in an LLC it is possible that you could have your ownership percentage shares differ for profit, loss, and capital. This means that you could be entitled to be taxed on a larger portion profit, and you could be shown as having 100% ownership in the capital (the building) while your father may be entitled to claim losses on the property. You would need to consult with an attorney in your state to make sure any such LLC is in accordance with your state law -- the provisions mentioned above require an attorney's attention.
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