USA Transfer to LLC then Sell

Jun 6, 2016
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United States

Thank you for this wonderful forum! My wife and I purchased a house in Diamond Bar, Ca two months ago, with the intention of fixing and flipping it. I renovated the house and am now ready to place it back on the market. We bought the house in both our names, but have since formed an LLC and want to transfer the house to the LLC. So the sale will be under the LLC.

- We bought the house for $540k cash
- We renovated it for $85k+ (it was a complete dump)
- We expect to sell the house for $700k
- We expect to pay $35k closing costs
- We expect a profit of $40k

Question: When transferring the deed to our LLC, should we choose 'gift' or should we specify a transfer value? If we specify a value, we will will have to pay transfer tax of $1.10 per $1000.

Our concern here is that if we choose to gift the house to the LLC, come time to sell the house (which is very soon), will the LLC be liable for the entire sale value as gain, since the LLC paid nothing for the 'gift'? If that is the case, can we still deduct all our expenses so that we pay tax only on the real gain ($40k)?

Note that selling in our names is not an option, has to be either through the LLC, or with my wife issuing me a quit claim deed. Reason for that is my wife is still not a US citizen, she is awaiting her green card. My wife and I own the LLC, with 98% being my share and 2% her share.

Thank you in advance.

Regards.. Jay


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