LLC query and imminent domain update

[Margaret CPA in OH]

After a great 3 week dive trip to Palau, it's time to catch up here (what happened to KC's husband?) and get back to work.

An LLC with a rental property is renting to member's son. Last year, market rate was received. For 2006, only 25% was received. On Sch E, this would be like a vacation home with personal use. What about this situation? If personal use, how is this input on the 8825?

A few months ago I had a thread about a university buying a property of a legally blind employee for campus expansion. After much negotiation (he brought in his frat brother who is an ADA attorney), he finally accepted an offer of $575,000 and the university agreed to provide transporation to and from work at no cost (neither 1099 nor wages) if he purchases a home within a 5 mile radius. As there are a couple of really nice pedestrian, desirable neighborhoods within that space, he is comfortable with this arrangement and I am encouraging him to buy as much as he can within reason. These are areas that are close to downtown, desirable and will only increase in value. He has decided to continue working until 65 at least and defer as much income as possible to bulk up retirement, then sell his new home sometime after retirement and relocate to a smaller, less expensive area.

Thanks to all here who gave input into this situation. It really helped him, and me, rethink some of the options presented originally.

[Gail in Virginia]

A few months ago I had a thread about a university buying a property of a legally blind employee for campus expansion. After much negotiation (he brought in his frat brother who is an ADA attorney), he finally accepted an offer of $575,000 and the university agreed to provide transporation to and from work at no cost (neither 1099 nor wages) if he purchases a home within a 5 mile radius. As there are a couple of really nice pedestrian, desirable neighborhoods within that space, he is comfortable with this arrangement and I am encouraging him to buy as much as he can within reason. These are areas that are close to downtown, desirable and will only increase in value. He has decided to continue working until 65 at least and defer as much income as possible to bulk up retirement, then sell his new home sometime after retirement and relocate to a smaller, less expensive area.

Thanks to all here who gave input into this situation. It really helped him, and me, rethink some of the options presented originally.

Thanks for letting us know how the situation turned out. In cases like this, it is nice to hear the resolution of situations we follow on the board.

[kcjenkins]

After a great 3 week dive trip to Palau, it's time to catch up here (what happened to KC's husband?) and get back to work.

An LLC with a rental property is renting to member's son. Last year, market rate was received. For 2006, only 25% was received. On Sch E, this would be like a vacation home with personal use. What about this situation? If personal use, how is this input on the 8825?

You left out one crucial item, is this LLC a single member LLC, or is it family members only? And is the rent expected to be collected later, or was it just a gift to the son? Also, is this situation expected to continue? If it was a family LLC, and the rent was forgiven, then I'd consider showing the full rent in the LLC, then a distribution to the parent of the 'gifted' amount. They risk piercing the veil, treating this property as if it were their personal property rather than as business property owned by the separate entity. I'd advise them to collect full rent even if they have to gift the son money to pay his rent. This mixing and mingling of personal and business is not a good idea at all.