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Property Depreciation

Taxpayer purchased a property for $120,000, he then granted this property to his wife's LLC for $100. Would the LLC be able to claim depreciation for the cost of the property  ($120,000) ?

P.S. If the LLC cannot claim the depreciation, would he claim this property as a loss? If so, where would this "loss" go?

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13 Replies 13
qbteachmt
Level 15

What is "granted?"

What is "Property?"

Why does she have an LLC? What type of property is this? Is he a partner in that LLC?

All of this is too vague to help; details matter.

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"Level Up" is a gaming function, not a real life function.

He gave the LLC the property for $100 (granted). It's a commercial property and he is not a partner in that LLC. 

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IRonMaN
Level 15

Use the $120,000 as her basis for depreciation.

I'm keeping this job. But I am selling surplus anvils on the side. If you are interested please call 867-5309
qbteachmt
Level 15

You cannot depreciation the entire Real Estate with Buildings and Lot, as one unit. Land does not depreciate.

$100 for the transfer is a sale, not a "grant." Who was on the title, who still is on the title, is there also a mortgage or other debt on the property. Did it All get put into the name of the LLC?

If this is a Community Property State, you can't give something to someone who already has a rightful ownership interest in it. She can put it into the LLC name.

"would he claim this property as a loss?"

Sheesh; who is guiding these people? There needs to be some legal advice, which you cannot get from strangers on the web.

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"Level Up" is a gaming function, not a real life function.
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I asked him who gave him this advice because I didn't understand the reason why . He purchased the commercial property for $120,000 cash and then sold it to his wife's LLC for the $100. It is now under the wife's LLC but now how do we claim depreciation on $100? I'm not sure if he would even be able to claim it as a loss on his personal taxes. So do you think it wouldn't be right to put the original price ($120,000) instead of the $100 for the depreciation on the LLC?

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sjrcpa
Level 15

You're not getting this.

No loss allowed for husband. 

Wife's basis = husband's basis (maybe plus the $100).

You can only depreciate the building and improvements; not the land.

You can only depreciate if used in a trade or business. You haven't mentioned what use will be made of the property.


ex-AllStar
BobKamman
Level 14

Nor do we know if the LLC is a disregarded entity, or has elected some other tax treatment.  

IRonMaN
Level 15

Folks should stick to what they do well and let someone else do the stuff they aren't familiar with.  As someone else around here says - just my opinion.

I'm keeping this job. But I am selling surplus anvils on the side. If you are interested please call 867-5309
PATAX
Level 10

👍 sound opinion there Iron Man... Just my opinion😉🐕

sjrcpa
Level 15

No gain or loss is recognized on transfers between spouses.

No gift tax consequences for gifts to spouses, as long as both are US citizens.


ex-AllStar
BobKamman
Level 14

Sounds like he's trying to stay one step ahead of creditors.  The $100 is probably the traditional $5 "and other valuable consideration" found in quitclaim deeds, but with inflation.  I would put this file in the "get your fees up front" stack.  

Skylane
Level 8
Level 8

Fwiw, people do stuff like this for 2 purposes only.

1. To annoy their tax preparers 

2. To pay legal fees

BobKamman
Level 14

@Skylane 

3.  Because they heard about it at a seminar.