How do you and your co-owners decide to become a roommate or common tenant? It ultimately depends on your situation and who you want to own your property with. Think carefully about which option is best for you or you may cause problems later. You can switch from landlords to common tenants using a process called ownership transfer. Any lessee when selling common shares may be treated as a separate transaction for the purposes of calculating capital gains tax, and the proceeds of each may be invested in a deferred tax exchange of 1031. In addition, several ICT sales may be bundled for exchange purposes, provided that they are made simultaneously or within a relatively short period of time. However, if you provide seller financing for the sale, the amount of that financing will be considered a taxable boot unless you take precautions. If such measures were not practical under your financial conditions, you can often achieve a favourable tax result thanks to the tempered tax treatment. Another alternative to a 1031 tax deferral could be a private annuity trust or “PAT”. Contact your tax or financial advisor for more information on these topics. The possibility of using a will to designate the beneficiaries of the property allows the co-tenant to have control on his part. If a tenant dies without a will, their interest in the property will pass through succession – an expensive event both in terms of time and money. Limited liability companies (LLCs) and limited partnerships (LDCs) are companies that can offer a large number of management and liability protection advantages over directly titled co-ownership agreements, such as the joint lease agreement.
For groups of owners who plan to occupy part or all of the condominium, the legal and tax disadvantages caused by these structures usually outweigh the advantages. In particular, according to generally accepted interpretations of tax laws, owners of LLC shares, limited partnership shares or business are not considered owners of real estate (unless the company qualifies as a stock cooperative) and therefore cannot claim tax deductions on mortgage interest and property tax or tax-free profit of USD 250,000/500,000 upon resale. If LLC, LP or Corporation qualify as a co-operative for residential property tax deductions, it is likely that it is in compliance with the conversion laws described above. Many people mistakenly believe that CESO leases control, as common percentages of ownership, the resale prices of owners and/or the distribution of revenue when the entire property is resold or refinanced. . . .