How Can I SELL A Property I Own To My LLC
I purchased a 4 Fam a little over 6 years ago and lived in it ( primary residence) for about 4 years. I built a SF a couple of years ago and moved into it.
I owe 115K and the house is worth around 260K. My mortgage payment is very low: under $700/mo which includes taxes ( I refinanced a couple of years ago to a 5/1 arm with a rate of 4.85).
All this to say that I do not want to sell this house. My problem is that if I dont sell in more than a year ( before the 3rd year out of the house), I will loose the tax break on the sale of a primary residence since you must live 2 years out of the last 5 in the house.
So Im thinking about selling the house to my LLC ( even for only 80% of the current value if that will make a bank agree). This way I can take some of appreciation tax free and still keep the property.
what do you think? any suggestions?
you will be dealing with yourself (your LLC). As to my knowledge you will have to establish a Fair Market Value.
Speak to your CPA ... it might be better to make a contribution (your rental) to your LLC, in order to capitalize the company (IRC 119 deals with all kind of contributions of that kind).
Definately talk to a tax professional. I think they will say the buyer should be a 3rd party, not your LLC. If you want to save the taxes, sell the property (while you qualify) and use the proceeds to buy another property. This will remove any problem that you might have with the IRS.
Several factors to consider here.
First, there is more than likely a "due on sale" clause in your loan that will be triggered (even to your own the LLC you are selling the property to). This will cause the loan to be due in full technically.
Second: What you are proposing is not a sale to a "third party", thus you are not technically adhering to the IRS code (especially because you own the LLC, which then stays with your personal tax filing status).
In general what you are considering is not cohesive to your best interests. Either sell to a third party (which is the spirit of the IRS code) or keep the unit.
Thanks to all of you the insignt and great advices... Im currently remodelling one of the APTs so it will be hard for me to sell even though I know I should. I have another 10 months or so to make up my mind...