Tax advantages of LLC at closing

I currently have property which the title is in my name that I am selling. My question is what are the tax advantages to having the funds transferred into my LLC?


None. The sale of the property is still a taxable event, regarless of whether you or your LLC gets the proceeds of the sale.

Actually there are several advantages. There are disadvantages as well.

It also depends on whether you are looking for tax advantages for you (the seller) or the buyer. If the buyer buys the LLC and maintains the title to the property in the LLC, then no transfer takes place. This saves up to 3% tax on the purchase price depending upon your city/state transfer tax rate. This can also be advantageous to the seller if selling to someone (typically another investor) who desires to maintain the title with the LLC, as the tax savings can make the property more attractive. As a side note, if the property is titled in your name and you had a potential investor/buyer interested in your property, you could offer to set up an LLC for them, transfer the property in (no transfer tax consequence) and he could then buy the newly formed LLC and avoid the 3% tax. The only problem is that if the buyer backs out of the deal and your property is now under the LLC, it will have to stay there to avoid the transfer tax. When taking title out of the LLC back into your name, you will be hit with the transfer tax for the full assessed value.

Disadvantages to titling residential rental properties in LLCs will become very apparent when trying to find a lender who will underwrite a loan at all on such a property let alone one with decent terms. Their risk is increased due to the fact that their ability to forclose on such a property for a delinquent loan can be problematic when title is an asset of an LLC instead of an individual.


But there are no income tax advantages to be gained, right Glenn?