Transfer Tax And The Family LLC
I am looking for information regarding transfer tax and the family LLC. My brother owns three properties, and he would like to form a company with my other brother and myself. (An LLC) that included these three properties. We were told two contradicting theories concerning the transfer tax law. First being that there would be none, because the division of assets is between family members and the second being that we would in fact have to pay transfer tax because we were rolling the properties into a company. We would like to start this company but do not have enough money to start it if we are going to be liable for the tax on three properties. We want to avoid this tax. Are there any loopholes that would allow for such a scenario that you are award of?
Thank you very much as any help will be helpful
JeanMarie
In Georgia a transfer tax would not be needed to transfer all of the properties into an llc. I can't tell you about other states, however most transfer tax is based on sales price and since you would not be "selling" the properties to a third party, but instead rolling them into your llc none would be needed.
Thank you for your reply. What is the difference between 'rolling assets' and 'selling assets'? The attorneys that I have talked to all said that there would be transfer tax. But they also said that if we (my two brothers and I) were to divide the properties among ourselves, there would be no transfer tax because we are siblings. Can you tell me if you are 100% sure that we wouldn't have to pay the taxes, and if so, why wouldn't an attorney know that?
Thanks again and look forward to hearing back from you!
JeanMarie
The state law governs whether or not a transfer tax is due when property is deeded between siblings. Apparently, all the attorneys you spoke to agree that deeding the property to a business entity does incur a transfer tax. Apparently, they all also agree that a deed transfer between siblings does not incur a transfer tax.
A local real estate attorney who practices in the county where the property is located will be your best source for an answer to your questions.
Since you already have your answers from the best available sources, no one on this board (especially someone from another state) will give you any better information.[ Edited by NewKidinTown2 on Date 09/29/2004 ]
In Nevada the LLC you transfer into has to be 100% owned by the current owner(your brother). So you can transfer the property into the LLC and change the ownership of the LLC anytime after that if you wish. You can change the ownership after the transfer with the State or simply write up an LLC resolution(internal document only) changing the LLC ownership to include anybody you wish.
When rolling the property into the LLC, will this incur the due on sale clause in any financing on the property?
Banks are in the business of making loans to people who will pay their mortgage on time, not calling them in. The bank realizes that most people will just place their loan w/ another bank(refinance) if they get a DOS. But remember that when you change the deed from you to an LLC, the LLC should be added on the insurance policy. The insurance companie will then send the bank the new declarations page showing the addition of the LLC. I have never heard one word from any bank on any of my properties and all are in various LLCs.