Limited liability companies (LLCs) have become one of the most preferred forms of business entities through which to hold title to investment real estate properties. They combine the flexibility and other benefits of partnership taxation with limited liability protection to the property owners that is similar to the protection afforded to corporate stockholders. This has ended up making an LLC the de facto choice of entity for owning and operating investment real estate. However, Subchapter K of the Internal Revenue Code (the section that governs partnership taxation) is unique and complex, and aspects are often misunderstood or foreign to tax practitioners who do not have extensive experience with it. Seemingly benign transactions conducted by an LLC or between the members of an LLC may result in unanticipated negative tax consequences.
Douglas S. Eichner, CPA has extensive experience working with investment real estate LLCs and with the Federal income taxation of partnerships. If you are considering forming an LLC to acquire property, contemplating buying out an existing member, or would like to discuss any other aspect of LLC taxation, please give us a call.