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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 3464
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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I just bought a two family home in New York. City. The cost

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I just bought a two family home in New York. City. The cost of the home was 1.875 million. As the buyer I had to pay the mansion transfer tax because the home was bought for more than 1 million, I now want to transfer ownership to an LLC which I'm going to form Because I'm using the property as a rental, My question is will I have to pay the transfer fees of the buyer and seller in this transaction if it's from me to my own LLC ?
How will this transaction affect the depreciation that I'm going to have on the rental property for tax purposes?
Thank you

Welcome and thank you for giving me the opportunity to assist you with your tax question.

 

An LLC is a disregarded entity for tax purposes; therefore, if you form a single-member LLC, the IRS considers the taxation of the LLC as a sole proprietorship and as such, you would report the any rental income on Schedule E of your personal 1040 tax return. That being said, you could utilize a Quit Claim deed to transfer the ownership from yourself personally to your LLC. This would not trigger the Mansion Tax.

 

The mansion tax will increase your basis in the property for the purpose of calculating capital gains when your sell the property. Therefore, the amount of the gain upon resale will be reduced not only by capital improvements but also by the amount paid for mansion tax. Therefore, you will be able to deduct the mansion tax from any capital gain realized upon resale.

 

I hope this information is helpful to you. If you require further information or clarification, please let me know.

 

Thank you and best regards,

Barb

Barbara and other Tax Specialists are ready to help you
Customer: replied 4 years ago.
right now i can depreciate the purchase of the building over 27 years, When I transfer ownership to the LLC can I depreciate it the same way when the LLC gets the building during a non monetary transfer , if the LLc got the building for 0 dollars how can the llc depreciate it ?

Hi, Mike.

 

An LLC is considered to be a disregarded entity by the IRS. If you are a single member LLC, you are considered a sole proprietorship. Therefore, you will use Schedule E of your personal 1040 income tax return to report anything to do with the rental property. So you will be able to depreciate based on the purchase price you personally paid for the property.

 

Barb

Customer: replied 4 years ago.
Thanks nice answer

It's been my pleasure, Mike.

 

Please take a moment to rate my answer to you since that is an important part of being an expert on JustAnswer, and I strive for excellence. If you have any questions in the future, please feel free to put "for bkb1956 or Barb" in the subject line, and I will be happy to assist you. Recommendations to family and friends are always appreciated.

 

Thanks again, and best regards,

Barb