Moving rental property from personal to corporation?

[ILLMAS]

I have a client that has various rental property under his name, in the past years he had some problems with tentants and now wants to move the properties to various corporations. Would a quick claim deed under each corporation work? Now for tax purposes, I would just move the properties, improvements etc... under the corporation with the prior depreciation? Also, what is recommend for a situations like this (tentants that like sue), to move them to a corporation or an LLC?

Thanks,

[kcjenkins]

It is ALMOST NEVER wise to put real estate into a corp, because of the double-taxation issue. Using one or more LLCs might be a wise move, although that should be combined with good insurance coverage. And be sure he gets a good attorney to set up the LLCs, because the Op Agreement is critical in a lawsuit. No do-it-yourself package will give him all the protection he's looking for.

[OldJack]

I have a client that has various rental property under his name, in the past years he had some problems with tenants and now wants to move the properties to various corporations. Would a quick claim deed under each corporation work? Now for tax purposes, I would just move the properties, improvements etc... under the corporation with the prior depreciation? Also, what is recommend for a situations like this (tenants that like sue), to move them to a corporation or an LLC?

Thanks,

I Agree with KC and would add that just moving them by deed to a default taxation single member LLC would give protection only if the LLC acts like a separate entity in its business activity (bank account, LLC billing, LLC collection, LLC pays bills, etc). If the LLC is taxed on 1040 Sch-E (default) you should show 2 property entities with carryover of the depreciation schedule from the previous part year individual business Sch-E and the LLC Sch-E part year entries in the transition year. By showing the rental activity as an LLC you thereby separate the LLC financial numbers from personal ownership indication.

[jainen]

>>what is recommend for a situations like this (tenants that like sue)<<

Hire a qualified property manager to screen applications and monitor the properties for circumstances that make him vulnerable to legal complaints. Also he needs to beef up his insurance.

If he feels a need to isolate the properties in individual corporations, he must be worried that a tenant can hit him for more than the specific property is worth. Why? What's going on over there?

Well, to answer the original question, state law controls how much liability protection LLCs and corporations can give an individual. Often it is not nearly as much as the popular books suggest. That is because the FORM of title is less important than the way the activity is conducted, and individuals are notoriously sloppy about the legalities. So hire a qualified lawyer too.