A person want to transfer his free hold fully paid property from his personal name to his 100% owned Limited company through gift with zero value. In doing so is he violating any rule, plus the is person required to pay capital gain tax and the company has to pay the stamp duty
CGT and stamp duty issue
- Thread starter siddiqui
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You've got a couple different things going on with your question here.
First, in most states, you can quit claim a deed to a person or entity of your choice. This achieves the transfer of title; however, it is state-specific. Therefore, you'll need to consult with an attorney or title agency further on how to achieve this transfer of title properly.
Second, if you transfer title with no monetary value in consideration to your personal business, this is a contribution and not a gift. Therefore, the tax consequence is dependent on how that LLC is taxed. Depending on your state, you'll either fall under one of three options:
1) the LLC is taxed as a disregarded entity and files a Schedule C on your Form 1040 (personal tax return)
2) the LLC is taxed as a C Corporation and files a Form 1120
3) the LLC elected to be taxed as a S Corporation and files a Form 1120-S
For options 1 and 3 above, there is usually no federal income tax consequence for this contribution. However, for option 2, there is a built-in capital gains tax to pay, if the LLC ever elects S Corporation status. Please note that although no immediate federal income tax implications may apply, this does not include state income tax rules. Facts and circumstances matter in this scenario also, which may change the analysis above. I'd strongly recommend consulting with your tax professional prior to making any final decisions.
First, in most states, you can quit claim a deed to a person or entity of your choice. This achieves the transfer of title; however, it is state-specific. Therefore, you'll need to consult with an attorney or title agency further on how to achieve this transfer of title properly.
Second, if you transfer title with no monetary value in consideration to your personal business, this is a contribution and not a gift. Therefore, the tax consequence is dependent on how that LLC is taxed. Depending on your state, you'll either fall under one of three options:
1) the LLC is taxed as a disregarded entity and files a Schedule C on your Form 1040 (personal tax return)
2) the LLC is taxed as a C Corporation and files a Form 1120
3) the LLC elected to be taxed as a S Corporation and files a Form 1120-S
For options 1 and 3 above, there is usually no federal income tax consequence for this contribution. However, for option 2, there is a built-in capital gains tax to pay, if the LLC ever elects S Corporation status. Please note that although no immediate federal income tax implications may apply, this does not include state income tax rules. Facts and circumstances matter in this scenario also, which may change the analysis above. I'd strongly recommend consulting with your tax professional prior to making any final decisions.