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I have couple investment properties and have mortagges on all

the properties. I am thinking...
I have couple investment properties and have mortagges on all the properties. I am thinking to form a single person LLC and transfer the investemnt properties into the LLC. My questions are,

1. Would it be possible to do it? That is, would the bank holding the mortgages allow it? if they do, what kind of things need to be done?

2. What are the tax consequences? Also, I am filing the rental income with Schedule E now. If the properties were transfered under the LLC, how am I going to file the tax?

Thank you.

Charles
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Answered in 5 minutes by:
12/3/2012
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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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.

Thank you for your question. If you read your mortgage it probably says that if you transfer the title to your properties, the loan will be immediately due and callable. That means you'd have to pay off the mortgage immediately. That's a little extreme, and for the most part banks don't keep track of property ownership unless you stop making payments. If you are worried about this, you would simply need to contact your lender and ask for permission to do this, in writing. They should grant it.

There will be no tax consequences, and if you are a single member LLC you will continue filing your tax return the same way you do now. The IRS disregards XXXXX XXXXX LLCs, and therefore they have no separate reporting requirement.

If you brought a second member into the LLC, then you would file a 1065 partnership return. However, it's not possible to file a partnership return by yourself, which is why the IRS disregards XXXXX XXXXX LLCs.

Hope this helps. Please let me know if you need anything additional.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

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Customer reply replied 4 years ago


Hi,


 


Thanks for the response. I will contact the lender for tehfirst question.


 


For the second question, If I put the properties under LLC, can I use Schedule C instead of schedule E? Thank you.


 


Charles


 

No, you would still use Schedule E as it is still investment property. You cannot include this on schedule C, as it is still passive real estate income.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

Megan C
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