I have a client who is a 3 member LLC involved in the flipping of houses. Or was flipping, now is more buying, improving, selling to a partner or the partner's spouse at a profit and then renting the property. The questions are a few:
1`. The properties and their financing are in the individal partner;s names, as banks will not grant the LLC credit. The payments are made by the LLC for PITI, and deducted on the LLC return. This would seem to create a reporting issue (1098's in invidividuals names, the LLC taking the deduction) Any thoughts?
2. Also, when the homes are "sold" it is done at a profit, Ex. Partner 1 buys the property for 100,000. The LLC puts in 15,000 in improvements, sells to partner 2 for 150,000. The LLC reports profit on the sale of 35,000. The LLC also pays all holding and closing costs on the property. Forget for a moment any percentage of completion issues surrounding homes held in inventory. Can the LLC recognize the gain on a related party transaction?
Convoluted I know. Thanks all!
1`. The properties and their financing are in the individal partner;s names, as banks will not grant the LLC credit. The payments are made by the LLC for PITI, and deducted on the LLC return. This would seem to create a reporting issue (1098's in invidividuals names, the LLC taking the deduction) Any thoughts?
2. Also, when the homes are "sold" it is done at a profit, Ex. Partner 1 buys the property for 100,000. The LLC puts in 15,000 in improvements, sells to partner 2 for 150,000. The LLC reports profit on the sale of 35,000. The LLC also pays all holding and closing costs on the property. Forget for a moment any percentage of completion issues surrounding homes held in inventory. Can the LLC recognize the gain on a related party transaction?
Convoluted I know. Thanks all!
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