Oct
15
Can I sell my house to my LLC or C-corp and then rent it back from my corporation?
Filed Under Wealth Creation
James H
I was just curious if this would be a good method for asset protection (assuming the ownership of either or both corps was in a Trust). Also I was thinking about renting the house back from myself with utilities included and furnished. Is this allowed in the USA say in California?
The property would transfer at the current tax basis value so no change in property tax, no capital gain or loss. Agreed I would loose the capital gains tax exemption (at least until I buy it back from the corp).
I was just curious if this would be a good method for asset protection (assuming the ownership of either or both corps was in a Trust). Also I was thinking about renting the house back from myself with utilities included and furnished. Is this allowed in the USA say in California?
The property would transfer at the current tax basis value so no change in property tax, no capital gain or loss. Agreed I would loose the capital gains tax exemption (at least until I buy it back from the corp).
The LLC or C corp would be owned by a non-revocable trust (probably off-shore). Of which the trustor would be the stockholders, the trustee my personal attorney and the beneficiary would be me.
This structure is not set up to avoid taxes or lenders. It is set-up to avoid ambulance-chasers. Since the sole practice of this business would be to rent this one house, to me, it can not get into an auto wreck or be drawn into a personal liability suit.
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2 Responses to “Can I sell my house to my LLC or C-corp and then rent it back from my corporation?”
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Seems dubious to me, though I’m not an accountant or a lawyer. You might want to check with one or the other (or both)!
It seems like selling your house to the LLC would have the opposite effect of protecting your assets, unless you personally are *more* likely to be sued than your LLC.
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Wouldn’t your LLC then have to pay taxes on the rental income? What about the capital gains on the transfer (I think there are capital gains taxes on your houses in the USA, but am not sure)?
If a corporation owns a house, it would be subject to capital gains tax when and if the house was sold; you’d likely lose any prinicpal residence designation.
Who would own the shares of the corporation? If you, couldn’t the creditor just seize the shares?
In Canada, there are laws to protect creditors from this sort of thing, at least in the period leading up to bankruptcy. Also, if you owe taxes, there are other laws that protect the government, in the form of a non-arm’s length transfer assessment.
I think you are likely wise to consult an accountant and a lawyer to weigh the various complexities of this transaction.