[WSBARP] assignment

Wed Nov 22 12:44:49 PST 2017

Yes, it is correct - see 26 CFR section 1.121(c)(3)(ii), which specifically
provides that a single owner disregarded entity is treated as the owner for
purposes of the section 121 exclusion.  Rev. Proc. 2002-69 does talk in
terms of business entities, but I don't know why else the Service would have
seen fit to include paragraph (c)(3)(ii), given that section 121 does not
apply to business entities.

Beyond this, I would agree that it is hard to understand why the property,
if it is these folks' principal residence, should be owned by an LLC.  There
may be other issues involved, but this would be contrary to the prevailing
view of LLC experts.

Bob Pampell

Robert Pampell, Attorney

21st Century Law Office (r)

19125 Northcreek Parkway, Suite 120

Bothell, WA 98011

voice: 425-329-2629
email:  <mailto:rpampell at swcp.com> rpampell at swcp.com

 <http://www.linkedin.com/in/robertpampell>
http://www.linkedin.com/in/robertpampell

From: wsbarp-bounces at lists.wsbarppt.com
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Kary Krismer
Sent: Wednesday, November 22, 2017 10:25 AM
To: wsbarp at lists.wsbarppt.com
Subject: Re: [WSBARP] assignment

That very well might be correct--my prior post was what the OP "might" be
missing, but I don't think that came through well.  Those would be issues
that would concern me.  Tax is an area that has always interested me, but
not something I practice in.  

I would note that the item you posted though only seems to apply to business
entities, which this seemingly is not, and only in community property
states, which makes me wonder if it's something meant to be applicable to
estate taxes.

But as to your line of thinking, there is also subpart (c)(3) of this which
seems to apply more directly to the gain issue (but not the interest issue),
but which refers to the entity having a single owner for some reason (and
also covers trust entities).

https://www.law.cornell.edu/cfr/text/26/1.121-1

Kary L. Krismer
John L. Scott/KMS Renton 
206 723-2148

On 11/22/2017 9:44 AM, Cody Moore wrote:

I'm going to tiptoe in to offer an opinion as much as ask some questions.
It's my understanding that a H/W LLC can be treated as a disregarded entity
and thus they still get the benefit of the home sale exclusion under IRC
121. I'm basing my understanding on the attached Rev. Proc. I had saved away
along with some old notes (not attached).

Thanks, 

Cody R. Moore 

Westberg Roepke Moore, PLLC

(208) 883-1520

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From: wsbarp-bounces at lists.wsbarppt.com
<mailto:wsbarp-bounces at lists.wsbarppt.com>
[mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Kary Krismer
Sent: Wednesday, November 22, 2017 8:44 AM
To: wsbarp at lists.wsbarppt.com <mailto:wsbarp at lists.wsbarppt.com> 
Subject: Re: [WSBARP] assignment

I would be surprised if the escrow would go along with that since you would
be violating the terms of the P&S agreement.

I have no idea what the tax advisor is thinking, but is it possible that you
could just transfer it after the deed is recorded and get the same benefits?
I'm fairly certain you could still avoid REET.  

As to what you might be missing:  1.  No homestead protection;  2.  No sale
of property excluding 250k/500k of gain on income taxes; and 3.  No
deduction of interest or real estate taxes.  Again I have no idea what the
tax advisor is thinking, but the first two of those are two things I
wouldn't want to give up--the third might not matter if it's a cash
purchase.

Kary L. Krismer
John L. Scott/KMS Renton
206 723-2148

On 11/21/2017 4:49 PM, Scott Thomas wrote:

Clients entered into P&S agreement, entailing construction of new home.
NWMLS form used, which precludes assignment unless seller agrees.
Construction of home turned out to be a difficult process, with numerous
issues turning up.  Long story short, I will make certain neither party sees
the other at the escrow office when the sale closes.  Now for my question:
clients, who entered the P&S agreement as a marital community, have been
advised by their tax lawyer that it would be preferable to form an LLC to
take title to the property.  I am thinking the easiest way to accomplish
this is to simply have clients assign their interest in the property at the
time of closing, after seller has executed closing documents and the P&S
agreement is satisfied, but before the deed is recorded.  Transfer taxes
should not be an issue, and all obligations under the P&S agreement would be
completed.  Am I missing anything?

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