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Foreclosure Forum |
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Use of trusts and LLC's to avoid clouds on title.In Reply to: Trusts & Dealer Status posted by Kim-CO on March 14, 2002 at 11:16 PM
: Ward, : I notice you recommend LLC's and Trusts for handling property transactions. Does this arrangement allow you to avoid Dealer status by the IRS thus eliminating the the payment of FICA on your profits? : I've been schooled in the notion that Trusts are the way to protect properties and corporations are the way to manage relatively short term real estate investments such as properties that are acquired, fixed up and sold immediately. The corp allows you to eliminate FICA on anything payed out to shareholders as dividends. This implies a strategy of minimizing salary and maximizing dividends to officers of the corp (me) thru the corporate structure. : I'd like to hear your thoughts on this approach. : Thanks, =========== Kim, most of us in the foreclosure game are just individuals who buy a few properties at a time and then flip them in 4 to 6 months. So there are no breaks on the profit we earn. Its taxed at our ordinary income tax rate since our quick turnarounds dont exhibit any investment intent. Thus the point of using the LLCs and trusts is for anonymity and the avoidance of inadvertent clouds on our title by vesting our investors with a pro-rata beneficial interest in the trust rather than putting them on title as tenants in common.
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