What Are the Tax Consequences of Transfering Property to a Limited Liability Company?
When transferring your property into an LLC, it could potentially be a taxable event. Therefore, it’s best to consult an attorney or tax advisor before making the transfer. In some situations, you may not be charged the relevant tax at the point you transfer your personal unit into an LLC. However, you may be charged later. No immediate tax consequence at the outset does not mean you do not need to pay the taxes.
For example, imagine you purchased a property unit for $430,000 and the fair market value at the moment you transfer your property unit into an LLC is $630,000. The property gain is $200,000. Supposing you have not paid taxes on the property gain at the moment of transferring, you still need to pay it later because it has just been transferred to the LLC.
Tax complications and implications generally require you to obtain expert tax advice before making the transfer.
Remember, if you decide to refinance that rental property in the future, you may run into the same issues noted above and be quoted a higher interest rate than if you had not transferred the property to an LLC.