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My son and I are 50/50 partners in a pass through LLC that…

My son and I...

My son and I are 50/50 partners in a pass through LLC that owns a rental house since 2012.

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Son wants to move into the house and live in it for two years in order to avoid capital gain taxes. Do we have to transfer the house out of the LLC and into his name? Will we be subject to nonqualifying use rules?

Accountant's Assistant: Is there anything else the Accountant should be aware of?

No that I can think of.

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Answered in 7 minutes by:
3/17/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,717
Experience: Taxes, Immigration, Labor Relations
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Do we have to transfer the house out of the LLC and into his name?

In order to qualify for section 121 exclusion - yes.

And some taxable gain may be realized of such transfer.

Will we be subject to nonqualifying use rules?

Yes - after two years - he be will be able to exclude 40% of the gain.

and after 5 years - 100% of the gain.

A part of the gain which is attributable to accumulated depreciation may NOT be exclude under section 121.

Let me know if that helps you to understand better your approach.

I will help you with details if needed.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,717
Experience: Taxes, Immigration, Labor Relations
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