Expert: Dick Dennis - 4/23/2007

Question
I can’t seemed to get a clear solution on the best way to form a partnership
With my partner in a 3 family investment in Rhode Island.  
Let you tell you our situation,  We bought
The house 2 years ago, he invested $100,000 up front (covering down payment, realestate fees, etc.)  I have matched his contribution during the past 2 years by fixing it up.  We are now 50 – 50 in the partnership which was our goal.  We formed an LLC which we where recommended to do at the beginning of our purchase which includes our partnership agreement.  The problem is the deed is in my partners name and not in the LLC’s.  We were lead to believe we could just transfer the deed into the LLC but that is not the case, the mortgage company will not allow it.  We are trying to understand the best way to form our partnership so that when we sell the property down the road we don’t get taxed twice (1. 15% capitol gains, 2. personal income tax for me when I receive the 50% profit from the partnership).  Do you have any thoughts??

Thank You


Answer
I don't know who you're getting the information from, Jim, but this would be the first time I have heard where a lender does not allow the transfer of the title to a LLC, or a living trust, etc. As long as the original borrower is part of the new organization, it should be allowed.

I recommend you consult a local real estate attorney to take care of this matter. Actually, you should have transferred the title at the time of the new loan. Somehow, I get the impression your "partner" is misleading you now that you have fixed up the property with your money.

I do wish you well.

Dick Dennis