SMLLC wants to rent building from another SMLLC that has the same 100% owner - Spidell

SMLLC wants to rent building from another SMLLC that has the same 100% owner

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Message Board SMLLC wants to rent building from another SMLLC that has the same 100% owner

  • This topic has 2 replies, 2 voices, and was last updated 1 week ago by Anonymous .
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    • #316974
      Anonymous
      Participant

      New client operates business as a SMLLC and also just purchased a commercial rental building using a different new SMLLC.

      The thought was to rent the building to the operating LLC but prior CPA said that would not be allowed as the LLC’s are disregarded entities with the same ownership and the client would be renting from and to himself which is not allowed unless one of the SMLLC was a different entity such as S Corp. or a two or more person LLC etc.

      Does anyone have experience in this issue?

      Thanks for any help.

       

    • #316982
      Lynn Freer
      Participant

      I think that is probably correct as both are disregarded entities.

    • #317065
      Anonymous

      If the property ownership was transferred to a 2 person LLC with one person owning 99% and spouse owning 1% it seems the rents would then be deductible by the operating SMLLC since the ownership of the rental property has changed to a separate legal entity.

      Also, is there any IRS/CA code section that says there has to be any particular ownership %, or would the 1% or less ownership be ok?

      Thanks

       

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