Could You Explain The Benefits And The Disadvantages Of Transfering A Personal Rental Property Into Business Asset?

[Brychan]

My wife owns a rental property in her name. The cash flow from this property is not as good as before and therefore we have decided to transfer this rental property into my personal business which would be incorporated next year.She will become a partner when the business is incorporated.Any suggestions or advice on how to proceed with this action and what are the advantages and disadvantages of transfering the rental property into a business asset?Thanks.

[Vinn]

You need professional help... Talk it through with your accountant.  The transfer may create a capital gains tax obligation(or a capital loss carryover).  There may also be expenses required(such as appraisal).  Generally though, those transfers are more headache than they are worth... NC 73 months ago Please sign in to give a compliment. Please verify your account to give a compliment. Please sign in to send a message. Please verify your account to send a message.

[Farnleigh]

Do not bother unless you are prepared to do it properly. The chief advantages of placing a rental property into a corporate entity are(1) a slightly greater measure of protection from liability arising from the property, and(2) possible favorable tax treatment for expenses arising from property management. The chief disadvantages of the transfer are(1) the time, effort, and expense it takes to make the transfer properly, and(2) the time, effort, and expense to maintain the business.  In order to make the transfer, you have to execute and record a deed in the name of the company, and either assign or refinance any debt securing the property.  You have to make the transfer effective with the taxing authorities and any homeowners association.  Then you have to keep a separate set of books for this activity, and report any income flowing through to yourself. I have seen many people cut corners when trying to do this, and they fail with the result being that any advantage is wiped away, and sometimes they get into tax trouble if they fail to report income.  They fail to refinance the note in the name of the company, or fail to get property insurance in the name of the company.  Sometimes they cannot do these things because they cannot obtain financing in the name of the business.  If you cannot transfer the property correctly and maintain the division between personal and company finances, you should not bother. In my experience none of this is worth the bother for just one property, but if you contemplate holding others in the future it is worth discussing with a qualified attorney or accountant.  Most people fail with the financing so it would be good to speak to a lender before you get started.   JoeG's Recommendations Property Management for Dummies Amazon List Price: $21.99 Used from: $10.63 Average Customer Rating: 4.5 out of 5(based on 13 reviews) 2 Years to a Million in Real Estate Amazon List Price: $21.95 Used from: $11.91 Average Customer Rating: 4.5 out of 5(based on 59 reviews) The Rental Property Manager's Toolbox: A Complete Guide Including Pre-Written Forms, Agreements, Letters, And Legal Notices: With Companion CD-ROM Amazon List Price: $29.95 Used from: $19.09 Average Customer Rating: 5.0 out of 5(based on 7 reviews) Understand where the obstacles are before you get started. JoeG 73 months ago Please sign in to give a compliment. Please verify your account to give a compliment. Please sign in to send a message. Please verify your account to send a message.

[Dubv]

The chief advantages of placing a rental property into a corporate entity are(1) a slightly greater measure of protection from liability arising from the property, and(2) possible favorable tax treatment for expenses arising from property management. The chief disadvantages of the transfer are(1) the time, effort, and expense it takes to make the transfer properly, and(2) the time, effort, and expense to maintain the business.  In order to make the transfer, you have to execute and record a deed in the name of the company, and either assign or refinance any debt securing the property.  You have to make the transfer effective with the taxing authorities and any homeowners association.  Then you have to keep a separate set of books for this activity, and report any income flowing through to yourself. I have seen many people cut corners when trying to do this, and they fail with the result being that any advantage is wiped away, and sometimes they get into tax trouble if they fail to report income.  They fail to refinance the note in the name of the company, or fail to get property insurance in the name of the company.  Sometimes they cannot do these things because they cannot obtain financing in the name of the business.  If you cannot transfer the property correctly and maintain the division between personal and company finances, you should not bother. In my experience none of this is worth the bother for just one property, but if you contemplate holding others in the future it is worth discussing with a qualified attorney or accountant.  Most people fail with the financing so it would be good to speak to a lender before you get started.

[Huritt]

but you had better be careful of the tax consequences of the transfer. Talk to your tax adviser before you do this.

[said99]

Talk it through with your accountant.  The transfer may create a capital gains tax obligation(or a capital loss carryover).  There may also be expenses required(such as appraisal).  Generally though, those transfers are more headache than they are worth...

[dalon]

I am not sure how this would make the property more profitable, but you had better be careful of the tax consequences of the transfer. Talk to your tax adviser before you do this. dejapooh 73 months ago Please sign in to give a compliment. Please verify your account to give a compliment. Please sign in to send a message. Please verify your account to send a message.