Real Estate LLC B&O Taxes? (Vancouver: sale, 2010)

[hyetech]

We just moved to the Vancouver area and I've been thinking of starting an LLC which will focus only on Real Estate investments (purchasing investment properties, renting, etc). I've been trying to figure out the B&O taxes Washington imposes, but don't fully understand how it works for Real Estate businesses.

Does anyone know if Real Estate income (rental income) gets taxed in WA? What about the sale of investment property? Seems like it could be a huge tax if we sold something since it's based on gross income.

I'm wondering if creating the LLC is the right choice or if I should just purchase property on my own (with a big umbrella insurance policy just in case).

[StealthRabbit]

Use an LLC for each property to reduce liability risk exposure.
Rental income is not subject to B&O (AFAIK, and how I have filed in WA for 25 yrs)
Tax on Sale of investment property is subject to the 'normal' real estate excise tax (1.5% ?)

I paid a bundle of that for the properties I sold in 2007 & 2008

I just learned today that if you have real property in an LLC, and have a living trust that will be the recipient of that property upon your demise... you must file a transfer form with the County, similar to the ones you file when you bring personal residence in and out of trust every time you re-finance.

There are free classes at the DOR 2x / month to explain B&O and other business taxes. (east 4th plain, near Barnes and Noble, next to and behind the old-Cub Food store (winco / Target)

[Sandy Nelson]

You will also pay Capital Gains Tax on the profit you make when you sell an investment property, unless you do a 1031 tax exchange.

Sandy

[StealthRabbit]

Originally Posted by Sandy Nelson

You will also pay Capital Gains Tax on the profit you make when you sell an investment property, unless you do a 1031 tax exchange.

Sandy

but not to WA state(question of OP)

Many of us selling currently, and through 2010, are foregoing the 1031 and 'readjusting our basis'. I had four 1031's into my current sale, but don't feel the FEDERAL tax rates on LTCG's are going to 15% or lower in the future.

2010 is the 'sunset' year and has even better rates, so if Obama leaves the current federal rates in effect 2010 may still be a good yr to sell LTCG (meaning you better by fast if you think you see something that you can resale within 2010)

2010 is also a good yr to die, as estate taxes drop to ZERO in some brackets .

Tax free income may take on greater value in the future ($500k and $250k exclusion on primary residence). That would be fueling my marketing if I were in the RE business. And drafting strategies to to turn properties faster to accumulate the exemption (only one exemption allowed every two yrs). Moving over 40 miles away because of employment change, unforeseen medical expenses, divorce, and having multiple births see to be some of the allowable exclusions. They quickly tightened the rules, but there are still some provisions. I'm not really capable of the 'multiple birth' thing

[Luke9686]

With all the above being said, I would contact an accountant, as well as a lawyer that specializes in real estate.