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Andrea, Esq.
Andrea, Esq., Lawyer
Category: Real Estate Law
Satisfied Customers: 12554
Experience:  I have practiced law for 25 yrs. with an emphasis on real estate, business law, criminal defense and family law.
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I will be leasing a house in Rochester NY daughter while she

Customer Question

I will be leasing a house in Rochester NY for my daughter while she attends the University of Rochester. Is there any value in setting up an LLC as the tenant, funded with sufficient funds to cover the lease, all utilities and tenant maintenance costs, and liability insurance?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Andrea, Esq. replied 1 year ago.

Hi, my name is ***** ***** I am one of the Attorneys here on justAnswer. I also have a post-Doctoral degree in Federal Taxation. In Answer to your question, I do not see any advantage to setting up an LLC as the tenant because the LLC must be engaging in a legitimate business and using the property as a necessary part in the conduct of their business. Since the LLC is not engaged in any legitimate business for which it would require an apartment as part of that business, the rent could not be deducted. If you did, in fact, set up an LLC and took the rent as a deduction and the IRS called you in for an audit, they would not only disallow the deduction, but they would charge and prosecute you for fraud. However, if you set up an LLC which actually conducted some kind of legitimate business in the leased property, then the rent would be deductible, even if the business had a loss.

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