The Tax Burden of Transferring Property

Written Apr 24, 2019 by Dan Nicholson

"Is there a tax burden when moving a property from your name to an LLC/entity?"

The answer to this question will depend on a number of factors, including local jurisdiction and the tax entity of the LLC (Partnership, S Corp, C Corp, etc.). Generally speaking, there is not an initial tax for the act of transferring a property from your name into an LLC. However, there exists the potential of additional tax burden after the fact that all partners or shareholders should be aware of.

Some negative tax consequences could be:

  • A reappraisal is triggered. If after the reappraisal the asset is deemed to have a higher property value, you can expect to pay higher property taxes
  • Taxes on the sale of the asset. The partners/shareholders of the LLC will be responsible for these taxes
  • Income taxes. If the property transferred to produce income, the members of the LLC will pay income tax on that revenue.

Contributing assets to a business can have substantial tax consequences to the contributor and the other individuals involved in the business. We always recommend consulting a professional when making significant contributions to a business. For digestible information and practical tools for understanding the tax landscape as a business owner visit Financial Telepathy.

If you’re looking for more financial help, visit https://www.nthdegreecpas.com/contact/