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My grandma has a rental property held personally since the…

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Hi Mark, My grandma...

Hi Mark, My grandma has a rental property held personally since the year 2000. We want to transfer the house into an LLC. On the date the rental property is transferred into the LLC what is the holding period of the property? short term? In addition if she sold all the stock of the LLC a week later she would have a short term capital gain right and the new member of the LLC would pay the recapture tax when the property is sold?

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My Grandma will sell the stock of the LLC to the new member on an installment note.

Submitted: 9 months ago.Category: Tax
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10/16/2017
Tax Professional: socrateaser, Lawyer replied 9 months ago
socrateaser
socrateaser, Lawyer
Category: Tax
Satisfied Customers: 40,078
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Hello...you asked:

On the date the rental property is transferred into the LLC what is the holding period of the property? short term?

A: Sec. 721 provides that a member’s transfer of property to an LLC taxed as a partnership does not result in income or loss to the member or the LLC. The LLC steps into the shoes of the contributing member with respect to the holding period and adjusted tax basis of the contributed property (IRC Sections 1223 and 723).

In addition if she sold all the stock of the LLC a week later she would have a short term capital gain right and the new member of the LLC would pay the recapture tax when the property is sold?

A: An LLC does not issue stock. A member obtains an interest in the LLC in proportion to the member's contribution. Sale of the interest after transfer of property to the LLC would produce a short-term gain or loss.

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Tax Professional: socrateaser, Lawyer replied 9 months ago

Hello again,

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