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Ask Lane Your Own Question
Category: Tax
Satisfied Customers: 12686
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Does Colorado state law follow IRC Section 1.761-2()(2)

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Does Colorado state law follow IRC Section 1.761-2(b)(2) election to be excluded from Subchaper K for an LLC holding one investment property?
JA: What state are you in? It matters because laws vary by location.
Customer: Colorado LLC with one CO member and one TX member holding CO property
JA: Has anything been filed or reported?
Customer: Entity formed in CO in July 2016 & has filed all necessary CO documents & are in good standing. We are trying to determine if they can follow Federal law for their first state income tax return

Hi. My name's Lane. Looks like no one's picking this up. I can help


I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice on three continents since 1986.

Bear with me a moment and I’ll look at Colorado, but ost state LLC acts preclude LLCs from electing out by providing that the LLC, not the members, owns the LLC’s property. Additionally, most state acts provide that an LLC member cannot demand a distribution of property. Consequently, unless the applicable state LLC statute treats the members as co-owners of LLC property, the election out of partnership treatment is not available.


Again, this will take a little research, but my bet is that the answer is no. Be right back

Customer: replied 2 months ago.
Thanks, I'll wait for your answer.

In Colorado the property must be titled to the LLC, and there's nothing in the code that allows for co-ownership, one of the prerequisites for §1.761-2(b)(2) election.

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