LLC & Residence

[S T]

I posted info only

I posted the above info only as part of the thread. No commentary as to whether it is right or wrong, just info, as I didn't know either what JMC was referring to.

Thought about it some more, and seems like Asset Protection Strategy, a large portion of which is based out of Nevada. Haven't we all seen incorporation or LLC in Nevada and pay NO State income tax relating to business and investments and rentals. Doesn't fly in Calif if you are operating in Calif, not sure about other States. Seems like another bit of misinformation. But people are gullible and think they can beat the system and pay huge bucks to try to accomplish tax savings.

I agree with the other posters, seems risky, and if I want to protect my HOME, I will gladly pay the premiums for the added insurance protection.(Higher liability limits and umbrella policies) And then take the steps that if I have other investments such as rentals or business take the necessary steps to limit the liability on those ventures before it gets to my personal holdings, forming LLC or S Corps for those ventures.

I certainly want to retain my Sect 121 exclusion on my primary home!

Sandy

[jmc]

Single-member LLC can hold homes/personal residences

>>Is there any further potential issues?<<

Yes, there are, but before you move onto them I think you need to work a little more with the ones you already have.

Start with, "the asset, residence, can be protected from lawsuits." More than likely, putting non-business assets into the LLC would instead destroy any protection they may have had for the rental property.

As to, "mortgage interest and property taxes can be deducted as LLC expenses," you know that's nonsense. The LLC can only deduct ordinary and necessary expenses of the rental business. Any use of business funds for personal benefit must be treated as a dividend, draw, or other distribution.

This is all a bigger problem for you than for the taxpayers. They would probably only have an underpayment with penalties and interest. You could face IRS sanctions and a civil suit for signing off on such a patently improper tax evasion scheme.

Since a single-member LLC is ignored for all income tax purposes, a business purpose
is not required. Thus, a single-member LLC can hold homes/personal residences also. In addition, in PLR 200004022, the IRS ruled that a residence owned by a single-member LLC qualified for the IRC $121 exclusion of $250,000 ($500,000 if married).
Again, your expression of "tax evasion scheme" is overly aggressive and should be avoided as a professional.

[Davc]

Since a single-member LLC is ignored for all income tax purposes, a business purpose
is not required.

By the IRS but state law for actually forming one may differ.

[Luis Mopeo]

Since a single-member LLC is ignored for all income tax purposes, a business purpose
is not required. Thus, a single-member LLC can hold homes/personal residences also. In addition, in PLR 200004022, the IRS ruled that a residence owned by a single-member LLC qualified for the IRC $121 exclusion of $250,000 ($500,000 if married).
Again, your expression of "tax evasion scheme" is overly aggressive and should be avoided as a professional.

Actually, 200004022 was revoked by letter rulilng 200119014.

"On October 28, 1999, the Internal Revenue Service issued LTR 200004022 (PLR-111497-99) to Taxpayer. The purpose of this letter is to inform you that LTR 200004022 is hereby revoked in accordance with section 12.04 of Rev. Proc. 2001-1, 2001-1 I.R.B. 1 (January 2, 2001).

"LTR 200004022 held that for purposes of section 121 of the Code, that Taxpayer is treated as owning Residence for the period of time that Residence was held in Partnership. We hereby revoke LTR 200004022 because it is not in accord with the current views of the Service."

[jmc]

Actually, 200004022 was revoked by letter rulilng 200119014.

"On October 28, 1999, the Internal Revenue Service issued LTR 200004022 (PLR-111497-99) to Taxpayer. The purpose of this letter is to inform you that LTR 200004022 is hereby revoked in accordance with section 12.04 of Rev. Proc. 2001-1, 2001-1 I.R.B. 1 (January 2, 2001).

"LTR 200004022 held that for purposes of section 121 of the Code, that Taxpayer is treated as owning Residence for the period of time that Residence was held in Partnership. We hereby revoke LTR 200004022 because it is not in accord with the current views of the Service."

Thanks for your update.