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Transfer of real property from a personal asset to a corporate asset tax implications

Long Beach, CA |

Does a transfer of a property owner's real property to a corporate asset to a corporation in which she owns all of the shares trigger any corporate tax liability? I understand there is no reassessment for Prop 13 purposes, but will the corporation be charged any tax liability for this mere change in form of ownership?
Also should she avoid a quitclaim in lieu of a grant deed if she might transfer the property back to her personal assets in the future?

Attorney Answers 2


Yes, you will trigger tax liability when transferring the real property as a personal asset to a corporation. There is really no way to get around this, and if you try to use fancy techniques like a quitclaim in lieu of a deed the IRS has ways to unwind the transaction and charge taxes.

The tax owed is your personal income tax, though, not corporate tax. The tax you owe is the difference between the price you sell it to the corporation and the property's adjusted basis (usually what you bought it for in the case of personal property) -- then multiply this by the personal tax rate. If it is your primary residence that you live in, you can exclude up to 250k of this amount in taxes -- but you can only do this every 5 years.

Legal disclaimer: The above information is not legal advice and should not be relied upon as legal advice. No representations are made in the above communication nor may any information contained herein be used in a court of law as a representation upon which you may rely.

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If you transfer it to a new corporation solely in exchange for stock in that corporation, it can be a tax free transaction. I strongly suggest you consult with a tax attorney to advise you on this transaction.

THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. Answering this question does not create an attorney-client relationship or otherwise require further consultation.

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