Rental Properties in an LLC?

[ETax847]

Current client was wondering if he put his 2 rental properties in a dual membered LLC, would he then be able to have the rental losses flow through to him, given that he has a full time job and does not work in the field of real estate.  Please advise

[Possi]

I had a similar question today, LLC or Trust. He is looking at it from a liability standpoint as well as a tax slant.

I believe they are taxed the same way, with limitations on losses, when they are not a realtor.

My client is a loan officer, not a realtor, as well.

Edited December 14, 2015 by Possi
clarification

[Randall]

How do they get it into the LLC if they have existing mortgages on the properties?  I wonder if the lender will allow the title transfer without a lot of reworking the loan.

 

[Abby Normal]

Putting rentals in an LLC doesn't change the rental loss laws.

[kcjenkins]

On 12/14/2015, 11:30:40, ETax847 said:

Current client was wondering if he put his 2 rental properties in a dual membered LLC, would he then be able to have the rental losses flow through to him, given that he has a full time job and does not work in the field of real estate.  Please advise

Details needed.  You say 'his' properties, does he own them free and clear, or are there loans outstanding on them?  You say 'dual membered LLC', who is the other member?  What is his goal? 

[SaraEA]

A dual member LLC will be considered a partnership for tax purposes.  Even if husband and wife, if it's an LLC it's a partnership (no joint venture where they can each take half the income and expenses).  The properties should be retitled in the LLC's name.  Yet I have partnerships that own real estate and when a property is sold I discover the member's name is on the HUD, not the LLC.   (Kind of defeats the purpose of having a a LIMITED LIABILITY company, doesn't it?)   When I look up the property taxes I often find them in the individual's name.  Sometimes the mortgages are in the LLC's name and sometimes in the individual's.  People seem to do whatever they want with LLCs, most likely because they don't understand what they should do and the point of doing it.  The banks don't seem to care as long as the mortgage gets paid and neither do the towns as long as they get their taxes.  The IRS may be the only one who notices.

Agree with others--the passive activity loss rules still apply, as do the basis limitations.  Say your client puts his spouse on as a partner in the LLC, but she didn't co-own the property and didn't contribute anything.  Her basis is zero, and her half of the losses is not deductible.  This could backfire on your client.  Get more details on the other member(s).