Question
Tax treatment of LLC owned building where 2 partners also live
Hi all,
New client formed an LLC (with three members) and purchased a 3-unit building. Two of the three members moved in and occupy two of the three units and pay slightly below market rent back to the LLC. The third unit is rented to an outsider at market rent. Some considerations: 1. Only depreciate the unit that is rented to an outsider? 2. Pro-rate 2/3 of all expenses to personal use (distributions)? 3. Any special considerations at time of sale to account for the business/personal split? 4. Is there still potential for principal home exclusion if they sell the building down the road?
I am curious how other accountants would handle this. Thanks all for the great advice!
