[Tong Liu]

Tong Liu

Greeting to all,

If I create a land trust, use the land trust to purchase a property, then sell the property to another person under his name within a short period of time. Will IRS label the beneficiary of the land trust a dealer? or label the land trust a dealer?

Thanks a lot,

Kiana

[Greg Christiansen]

Greg Christiansen

Taxes should be the same regardless if a trust is used or not. Land trusts are flow through entities so ultimately you would be the one paying taxes if you are the beneficiary (or your corporation if they were the beneficiary).

[DON WEDE]

DON WEDE

Tong Liu:

Greg is correct. You would want a seperate entity other than your self (Corporation, LLC) to be the beneficiary. If you are intending to buy and sell on a regular basis use another entity.

As Jimmy Napier says if you are in a business do it in a corporation or LLC.

Don Wede

[Tong Liu]

Tong Liu

Thanks for the quick responses!

I am thinking that I will do cash purchase for REOs under Land Trust, then sell it to my credit partner for the same price, so he will get a purchase loan from the bank (to get most of my capital back). After that, I will put the property back to the Land Trust to hold to rent it out. I am worried that I could be in the dealer situation.

From the answers, it seems that I should be worried.

Am I right?

Kiana

[Tong Liu]

Tong Liu

Want to clarify, I was planning to hold the beneficiary under personal property trust.

[Greg Christiansen]

Greg Christiansen

That’s fine. You can stack all the trusts you want. At the end of it though is a beneficial interest that is going to go to you, another entity or another person. Still, it will be pass through.

If you want to pay 15% capital gain taxes only instead of getting hammered being a “dealer” you are going to have to hang on to it for a while. I would say at least a year to be safe. Otherwise, you can use some tax strategies to help cut down on your taxes. I would start with an S-corp for holding your beneficial interest. If you are quick turning properties though, I don’t know that I would fool with a PPT. Don’t make it too complex for something you won’t be holding for a long period of time. A LT with an S-corp is plenty of protection.

I am sure others will have more info for you.