Tax Issues and the Land Trust

The Land Trust is a revocable trust and a “pass-thru” entity so that all revenue, expenses and depreciation are passed thru and reported on the beneficiary’s own income tax return.

The Land Trust is also a “disregarded entity” that is disregarded for tax purposes. The real estate owned in the Land Trust is treated as if it was owned directly by the beneficiaries of the land trust for tax purposes.

The Land Trust will not file its own income tax return and will not request a tax identification number. The beneficiaries’ social security number is used instead.

Homeowners that buy their personal residence in a Land Trust will still be able to exclude $250,000 if single ($500,000 if married) in capital gain taxes tax-free when they sell their property.

Rental property owners that buy their real estate in a Land Trust will still be able to defer the payment of their capital gain taxes through a tax deferred exchange later when they dispose of their property.

The Land Trust does not circumvent any other taxes such as property taxes, estate taxes or gift taxes. The Land Trust merely allows the property owner to buy property on a confidential basis, but will not get around any tax liabilities that would otherwise be due.

Article by: William Exeter

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