Clients should realize pros and cons of the entity they form for their business or investment activity.

• S corporation?
• How about an LLC?
• When planning to purchase several single-family homes … should I form a C corporation?

Answering the question of entity choice is best before transactions are initiated, but remain a valid question at any point. There are issues like income taxes, legal protection, partners, ease of doing business, insurable risk, and access to credit. Cash flow preferences, (now or later),  along with the right entity can even slash your tax burden while providing legal protection against creditors and lawsuits.  The right entity could affect your ability to deduct 100% of your medical expenses,  and save income and self-employment tax.

Choice of Entity Considerations for Real Estate Investors …

Choice of Entity in Real Estate Transactions. (With Emphasis On Partnerships. And Limited Liability Companies). Tab le of C onten ts. Page. I. SCOPE OF …

(Speak to your accountant/ lawyer/ lender/ and insurance agent for specific advise – the following is excerpts from counsel received and not to take the place of paid advisers in their respective field of licensing.)

Well here’s some interesting perks for home sellers looking for tax breaks. No tax on up to $500k MFJ if owned over 2yrs – most of us knew that one, but did you also know:

There are several exceptions. Under the old rules, if the home has been held fewer than two years, and if the move is job-related or health-related or there were other unforeseen circumstances, the taxpayer was allowed a prorated portion of the exclusion. The IRS ruled that unforeseen circumstances could include:

• divorce, legal separation, or death of a spouse;
• becoming eligible for unemployment compensation;
• a change in employment that makes it impossible to pay the mortgage or basic living expenses;
• multiple births resulting from the same pregnancy;
• damage to the home from a natural disaster, act of war, or terrorism; and
• condemnation, seizure, or involuntary conversion of the property, such as foreclosure.

The dad signed a deed giving property to the child, left it in his desk assuming child would find it after death.

Deed was

1. Never delivered
2. Never accepted
3. Never recorded (aka perfected) although not a requirement but a good idea
4. and is now subject to probate without a will to pass the property

Deeds undelivered until after death in Michigan do not survive death.

Lesson: See the lawyer now.

Landlord / investors, are you using component depreciation as an option in your year to year tax planning ? If income will remain flat or decline, you may wish to ‘pull’ your deductions back with various planning techniques.

Another quick tip, you can increase your ROI by 4+% just by using a different entity to hold your investments. 

http://www.realdata.com/book/apod.html