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What are the tax implications of transferring real property(no mortgage) to a LLC, federal and state?

Cincinnati, OH |

I am in the state of Ohio.

Attorney Answers 2

Posted

Like most answers to questions asked of attorneys, the answer is "It depends." If a single individual owns the real estate and transfers it to a single-member LLC that is not taxed as a corporation, the answer is probably no. If the property is owned by a husband and wife and the LLC is a multi-member LLC, there may be eventual tax implications, but none immediately.

Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship. Do NOT rely on anything I have written here -- You should contact a lawyer in your area immediately after reading my posting.

The following disclosure is required pursuant to IRS Circular 230: unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

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There is no immediate taxable event when the property is transferred to the LLC. Section 712 of the Internal Revenue Code provides generally that no gain or loss is recognized when property is contributed to a partnership (assuming LLC is taxed as a partnership) in exchange for a partnership interest. Section 351 is the equivalent corporate code section, but unlike partnership rules, has a control requirement.

Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.

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