NUTS & BOLTS
FindingCommonGround BREAKING UP IS NOT SO HARD TO DO, WHEN COMBINING OWNERSHIP OF PROPERTY AS A SINGLE-MEMBER LLC WITH A TENANT-IN-COMMON AGREEMENT.
by Steven Hickox
For multiple-member LLCs, the entity obtains a federal employer identification number (EIN) and files a partnership tax return with tax incidents reported to the members on Form K-1. However, the use of this form of ownership can create unforeseen problems when the property is sold at a gain. When real property owned by an LLC is sold at a gain, the LLC may perform a 1031 exchange at the partnership level. In that case, the LLC sells the relinquished property, and the LLC buys the replacement property in accordance with the rules of IRC Section 1031. But often, the various members of the LLC have different goals when the relinquished property
imited liability companies are young creatures re- cently created by state statutes. By contrast, the law of tenants in common is centuries old, with much of it dating back to English law. In a May-December romance, these are wed into what is often the best structure for holding multi- ple-owner investment property. The limited liability company is the usual vehicle for holding real estate. These entities are easy to create and manage. They separate out the risk of owning the property, thereby protecting the other assets of the members (owners). Members can own various percentages of the LLC according to their contribution.
78 | think realty magazine | mar :: apr 2016
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