Would an SMLLC for rentals ever want to be taxed as a corporation?

[Gary2]

A single member limited liability company has a choice between being treated as a disregard entity or being taxed as a corporation (presumably an S-corp). If the disregarded entity choice would result in a Schedule C, then one obvious advantage of the S-corp approach is that some of the income can be treated as corporate profits, not subject to SE tax (with the disadvantage of payroll and extra filings).

If the SMLLC exists solely to hold rental real estate, so that all of the income would be reported on Schedule E (or interest on Sch. B), are there any benefits at all to being taxed as an S-corp? I don't see any, but I thought I'd ask for other opinions.

[Edsel]

PH Corporation

If this thing elected taxation as a corporation, would it be in danger of being held as an investment holding company, since it is simply investing and not developing the properety? (or does PH apply only to securities and notes)?

[Davc]

PH only applies to C-Corps. However putting real estate in a Corp is usually not recommended since it's a deemed sale if you ever want to take it out.

A SMLLC that has not elected to be taxed as a Corp reports rental activities on the same form as they would without the LLC. Unless the rentals are short term and/or significant services provide it is not a schedule C activity.

[MilTaxEA]

I've heard, as a general rule, to never place real-estate into a corporation. Instead, use a partnership or sole proprietorship.

[Gary2]

I've heard, as a general rule, to never place real-estate into a corporation. Instead, use a partnership or sole proprietorship.

Even a partnership has disadvantages, particularly if one or more members wants to do a like-kind exchange to a different piece of real estate. A tenancy-in-common is often preferable, but it's difficult to know precisely how to avoid partnership treatment.

[Burke]

Before LLC's came along, it was quite common to hold rental real estate in an SCorp. (Not C-Corp). Rental income & expense is reported on the 1120S Form that corresponds with Sche E (I think it is 8825 or close to that.) Profits/losses pass thru on K-1's to owners as passive income each subject to the AGI limits on losses based on the individual's 1040. Unless they elect to be taxed as a corp.