I am just finishing up my first flip and I am closing on another house I plan to flip next week.Currently I have a corporation that I draw a salary from as well as 2 people I employ to do the repairs.I am unsure if I should transfer the properties into a land trust or llc?I have a mortgage on the houses.Should I put them both in the name of my corporation?Any advice would be appreciated I am nervous I am setting things up wrong.I have been getting conflicting information from books I have been reading.
Thanks!
uh, if you’re ‘finishing up’ then why bother. property should be purchased into the LLC from the start, or transferred immediately. what are you trying to accomplish?
I am trying to avoid self employment tax and I want the gain to pass through the corporation instead of my personal tax return.How do I transfer ownership to llc?I have a mortgage on the property .Do I need an attorney to do this and does it take a long time?It will be going on the market next week so I have some time while I look for a buyer.
you’re too late.
An S-corp avoids self employment tax only if you take a reasonable salary.
IF you set up an LLC taxed as S-corp and
IF you contributed the property at your cost (plus repair costs) and
IF you somehow managed to pay yourself a reasonable salary from the LLC
THEN you could avoid self employment tax on the remaining distribution from the LLC/S-corp.
At this point you don’t really have a means to pay yourself the salary, so you’re screwed on the taxes.
Shoulda planned ahead.
Can I keep the properties in my own name and have a company that I own do the repairs and deduct that from the gain?
yes, everything you spend is deductible, either as an increase to basis or repairs expense.
So your saying if I purchase the property for $200,000 I could have my company charge $80,000 for the repairs and when I sell the property for $310,000 I will only have to pay tax on a $30,000 gain?
on that piece, yes.
However, your company charged $80,000 for repairs. If those repairs only cost your company $20,000, then your company is also going to have $60,000 of taxable income. unless it’s a C-corp, that income is going to flow through to your personal return and still be subject to SE tax. so you really haven’t saved anything, have you? Only moved it around some.
It is a c coorporation.Do you think this is the easiest way for me to run my business with the most tax savings?Thanks for all of your help!!
I don’t have enough information to comment on your specific circumstances.
What is the best way to structure a house flipping company ?I have a c coorporation but I cant transfer the properties into the name of the coorporation because I have mortgages on them.
I have a question.
I just purchased an income property in NY while I live in CA. I have set up an LLC in NV. I intend to have a land trust with a trustee known to me and an LLC as a beneficiary of my land trust.
How do I resolve the issue of the following: a property management company would be collecting rents and sending them over to … whom? To the trustee? I understand that not to the LLC, of course. But would it be to the trust, or the trustee of this trust (that is how would I set up a bank account?).
Thank you for your wisdom.
the beneficiary is “beneficial owner” and is treated as the actual owner in all transactions with 3rd parties.