Expert: John Kirk, CPA Date: 7/24/2008 Subject: FLLC and The Primary Residence Exclusion
Question Hello Mr Kirk,
I have came across a situation that I cant quite answer. If someone sells their primary residence and would like to receive the primary residence exclusion, would they be able to get it even though the property is under a FLLC? I know in order to receive this exclusion you need to own the property and live in it for 2 out of 5 years, but it does not state who needs to own the property.
Answer If the FLLC's members are only the husband and wife, the LLC is a disregarded entity, and the exclusion would apply.
If the LLC has more than the husband and wife as members, the LLC is the owner of the property, and you should have transferred title to the LLC and have paid rent to the LLC.
Have you taken interest and tax deductions on your personal return regarding this property. If so you probably have an ineffective LLC, and the LLC folds in on itself, because the LLC has never been funded with the property.
We would need to see the membership documents on the FLLC before we can give you a definitive answer.
