who can deduct for renovation after quitclaim ?

wetjer · Joined: 30 Apr 2008 Posts: 1 1.34 Dollars($)

I am partners in a small (2 person) property investment company, we have several properties that we rent. The company wants to refinance a house that we own and are in the process of renovating. Banker suggested that we could get a better rate if I bought the house; he then suggested that I could quitclaim it to the company. Would this allow the company to claim (on federal tax) money it spends for renovation? How will this affect me personally when we sell the property (I will never live there)?

larry · Joined: 27 Jun 2007 Posts: 2951 411.26 Dollars($)

Hi wetjer,

Welcome to the forum.

If you quitclaim then you will not be the owner of the property? And you will also have to pay gift tax on the amount of the property value.

Now when the property will be sold the company will get the sale proceed not you because the company will be the owner after quitclaiming.

The property is mortgaged right? You need to take the lender's consent before quitclaiming the property.

Feel free to ask if you have any further questions.

Best of luck,
Larry

jheard · Posted: Thu May 01, 2008 6:40 am Post subject:

Your facts are contradictory. If the company owns the property now, you cannot quitclaim it to the company because you don't own it. It think what you mean is if the company quitclaims the property to you, can the company take the deductions and will you face personally liability.

The answer is: no, the company cannot take the deductions if you own the property. Also, you will have personally liability for any losses or taxes with regard to the sale of the property.

If you are part owner of a company that owns several rental properties and you don't understand basic tax issues, you should contact a CPA right away and get professional advice.

I would take the banker's advice lightly because he will do what will make the most money for him. You should consult with a real estate attorney, who has a fiduciary duty to provide you with the best advice that is in your interest.

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