Over the last two years, our part-time ventures in Real Estate are becoming such that it will become a full time business. We currently have a Partnership LLC for our rental properties and a Sub-S LLC for our quick turn properties.
My undersandings on the conversion to a Real Estate professional:
- By becomming REP, the $25k passive limit is removed.
- By becomming REP, rental income changes from passive to active.
So, if my understandings are correct, wouldnt we be better off changing the taxation of our Partnership LLC to another Sub-S LLC since the income is now active anyway?? I believe the rental properties would be treated the same either way (long-term gains) since they have been held > 1 year. We could then take a 60/40 split between salary and distribution and save some SE taxes. Any thoughts on this??