Do I Have This Right Re:LLC And Taxes...(m)
Ok, I put my property in my LLC, when I sell, I get taxed 15%, then I still have to pay self-employment taxes with will be attached to my regular income. What then is the benefit of an LLC besides the cloaking protection which really isn't much if a good lawyer wants you. Why not buy and sell under my own name? I had still get taxed twice right?
Oh, I bought properties under my name, is it too late to do the land trust, LLC transfer deal? I bought them a year ago and two I plan on selling this year. Is it too late.
quinn
As the owner of a property you can put it in a trust at any point. Lenders can not stop you from putting the property in a trust (specific exemption to the DOS clause).
The rule was set up to let people do estate planning, etc. It is sometimes use to hide a transfer of ownership so the exemption is big enough for some deals that are not within the spirit of the rule change.
As to the LLC... More or less it should work as a pass through to your personal tax return if you are the only person on the LLC. Even if the LLC was a master LLC with more then one person you would still find that it is not the same as a C corp when it comes to double taxation. I am not expert and I might be a little off on this. I am repeating (I think) what a tax advisor told me yesterday. Check with a pro to get the real word.
John
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quinn,
You seem to be confused by the difference between an active income business and a passive income activity. Here is my "in a nutshell" overview.
Rental property, by default, is defined by the IRS to be a passive income activity -- regardless of your level of active participation. Self-employment income taxes do not apply to passive income activities. The presence or absence of a pass-through entity (such as a LLC) in your rental property operation does not affect your tax liability when you sell your investment property.
An active income activity is a trade or business and the income you derive from your trade or business is taxed as ordinary income. Since you are also the owner of the business, income derived from the business is considered self-employment income from which you must pay your social security and medicare taxes (the so called self-employment income taxes).
Tax avoidance is legal and evasion isn't.
You can avoid self employment taxes to a large degree through entity structure in an S corp taking some if not all earnings out as capital gains not wages.
See the other post in this forum on LLC's where it has been discussed at length.
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