The mother of this family owns the property (which is currently rented). She was unable to handle it herself, needed repairs done on the house, and could not get a loan on her own. The three siblings formed the LLC to get the loan and manage the property. The mother is not part of the LLC or a party to a loan that the LLC got. The bank allowed the loan, with the house as collateral, by means of a contract of sale that said the mother would not sell the house to anyone else, and the deed would pass to the siblings (LLC) upon her passing.

The contract also says that in the meantime, the LLC is responsible for managing the property. Any annual positive rental profit after all expenses and debt service goes to the LLC (as well as any losses). The contract also stipulates that LLC provides deed holder (the mother) with an annual statement showing all income / expenses for her tax return.

This is pretty much right out of the contract. If anyone has any input on the best way to treat this, I would greatly appreciate it. This is definitely a new one for me. Thanks!