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Family LLC

Level 2

Family of 5 siblings are beneficiaries of a beach house in a revocable trust whose grantor has passed away.  Siblings are considering either leaving the asset in the trust, which would become irrevocable, or establishing a Family LLC.  If the Family LLC is not a partnership, is tax reporting still done on a Form 1065?  If there is no income from the property, how are real estate taxes, etc., deducted to the family members?  

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3 Comments 3
Level 15

A multi-member LLC by default is a partnership ------ unless an S corp election has been made.

Slava Ukraini!
Level 15

And don't make that election for a real estate entity.

Level 7

Deed is currently in the name of the irrevocable trust?  If so, why not simply keep the trust (perhaps as the grantor intended)?  Would a new entity follow the grantor's original distribution provisions?  Will you have to pay a transfer tax if the deed is transferred to a new entity?

Ask legal counsel since you are really in the middle of a long-term, estate planning exercise for potentially multiple families (e.g., where the spouse of one sibling is never going to agree with the spouse of another).

Ah, the non-tax reasons associated with trusts.....those possibly BOI-exempt entities!!


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