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    scolar's Avatar
    scolar Posts: 7, Reputation: 1
    New Member
     
    #1

    Jun 13, 2019, 02:51 PM
    Income from a real estate in other state
    I am a resident of California (live/work/pay taxes here), and I'm going to buy a residential property in Connecticut and let my parents live there.

    My plan is to form a Connecticut LLC, which will own the property and rent it out to my parents for a nominal fee (basically, to cover property tax and show a small net profit, say, $1000 a year - I don't want to show losses, unless somebody tells me it's not a red flag - I am happy not being audited ever).

    So, my questions are about how will my tax filing season change:
    1. LLC by default passes taxes though to the owner. Is there any reason to opt to be taxed as C corp?
    2. If taxes pass through, I'll need to file a non-resident state income tax report in CT, correct?
    3. Will my California income be taxed or ever mentioned in CT declaration?
    4. What should I tell California about my LLC/income in CT?
    5. Will TurboTax be able to handle that?

    Thanks.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,815, Reputation: 846
    Senior Tax Expert
     
    #2

    Jun 13, 2019, 07:26 PM
    Even though the LLC is located in Connecticut, you will still have to claim the income on your California tax return.

    Further, because the property is located in California, the state of California will consider the LLC to be doing business in California, which means the California LLC return will be required and you will have to pay the $800 LLC fee.

    Plus you likely will also have to file a Connecticut return for the LLC.

    It is simpler to just rent your parents the property and charge them something close to the market rate for rental property, and you will be fine.
    scolar's Avatar
    scolar Posts: 7, Reputation: 1
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    #3

    Jun 14, 2019, 10:17 AM
    Further, because the property is located in California, the state of California will consider the LLC to be doing business in California, which means the California LLC return will be required and you will have to pay the $800 LLC fee.
    But why this LLC will be considered doing business in California, if the only property it owns is located in Connecticut? The only connection to California is the owner.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,815, Reputation: 846
    Senior Tax Expert
     
    #4

    Jun 14, 2019, 05:02 PM
    The fact that the owner lives and works in California is the reason the California FTB considers the LLC to be operating in California.

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