USA Passive Loss Carryover

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QuickNumberC

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What happens to passive rental losses that have accumulated when an individual transfers rental properties from being held personally to a single member LLC (which then elects to be taxed as an S-corp)? It's a related party transaction so I assume the losses aren't released. Do they just stay on the personal return to be offset with future passive income from the new LLC?
 
D

Drmdcpa

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Why are you putting real estate into a corporation? That should be the biggest question. But in general passive losses should follow the property provided there is no change in control. If your client is 100% owner of the property before it is put into an LLC, and 100% owner of the LLC there was no change in control. But again I would seriously question anyone that puts real estate into a corporation. The LLC is fine and often recommended but electing to be taxed as an S corp is setting you up for tax traps.
 
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