I have a house being built that I plan to sell once it’s complete. This is the only real estate investment I currently have and really don’t have any material business expenses. Are they’re any tax advantages to incorporating to an LLC before selling the property?
Since you’ve already bought the house and (I assume) incurred costs for construction, you have already crossed the threshold for the time to make that decision.
You can still “sell” the house to your corporation, but then financing, chain of title and other issues become problematic.
Next time, more advance planning would help.
Mark Wagner, CPA
Mark, thanks for your reply. Actually I am holding the house with a $25K down payment. Once it is complete, I’ll actually make the purchase, then turn around and sell it.
Another question I have is can business expenses be deducted from a capital gain before paying the capital gains tax?
Business expenses are ALWAYS deductible, it’s just a question of where to put them.
Business expenses (office supplies, etc) are not deducted from capital gains, but all repair expenses can be. This includes utilities during repair, insurance, mileage if your documentation is good, and of course, all the actual repair costs. Everything you spend to rehab the property increases your basis in the property.
Other business expenses will be deducted on your Sch C, 1120 or 1065, depending on how you have chosen to have your LLC taxed.
Mark Wagner, CPA