Legal Question in Real Estate Law in California

Re: How to structure this deal

You know the saying about opinions - you are going to get a number of opinions here, but you should not rely upon any of them for determinative legal advice. Attorney Shers is correct in that the IRS will take the position that if you earn income in the U.S. through this property (appreciation or otherwise), you are subject to U.S. tax laws. I don't believe you will escape U.S. taxation, but review the question with both tax counsel in your country, and in the US to determine how you will be treated. Often times you can offset the income taxes here with income taxes paid in your home country, or the other way around. You need to ensure that you will not end up being double-taxed as a result of this transaction.

Second issue is the recommendation that you hold it in an LLC. There are, again, tax issues related to the form of ownership, and I don't think given the very few facts you have provided, its appropriate for anyone to suggest a form of ownership here. Did you know that LLCs in California pay a gross-receipts tax that an S-Corporation does not pay? If this property generates a large amount of annual income (even if you have corresponding expenses to off-set the income), you will pay a tax to the State of California based upon that income. There are too many factors to examine in this forum. I would suggest that you and your prospective partner need to obtain local counsel (separate) to represent each of you in structuring the transaction. Further, you personally need counsel in your home country to advise you on tax and other potential issues.

*Due to the limitations of the LawGuru Forums, The Gibbs Law Firm, APC's (the "Firm") participation in responding to questions posted herein does not constitute legal advice, nor legal representation of the person or entity posting a question. No Attorney/Client relationship is or shall be construed to be created hereby. The information provided is general and requires that the poster obtain specific legal advice from an attorney. The poster shall not rely upon the information provided herein as legal advice nor as the basis for making any decisions of legal consequence.

Re: How to structure this deal

You 'structure the deal' between the parties any way you like, with a written contract that contains all the terms of the agreement, as long as it is done in a way that the lender will approve. It appears you need to have an experienced attorney help you do so, to make sure all the the needed items are handled in a way that prevents disputes and problems later. If serious about doing so, feel free to contact me.

Re: How to structure this deal

You 'structure the deal' between the parties any way you like, with a written contract that contains all the terms of the agreement, as long as it is done in a way that the lender will approve. Whether you do an LLC or other form, depends on all the facts and tax issues that your tax adviser will instruct you on. It appears you need to have an experienced attorney help you do so, to make sure all the the needed items are handled in a way that prevents disputes and problems later. If serious about doing so, feel free to contact me.

Re: How to structure this deal

LLCs are typically the best options for real estate holdings and your interests can be well articulated in the paperwork. Since there's a loan component, the paperwork has to be carefully prepared. We do a lot of this type of work. Please call or email me and I'll see how we can help you.

Re: How to structure this deal

The IRS is a firm believer in equality. Anyone who has green money pays the same taxes on property within the USA. But your country might tax the income differently then here, so you should speak to a tax expert in your country. And then you should very carefully structure the deal so that both of you know exactly what you are getting into and what responsibilities each has. Also, it may be more beneficial as to taxes if one gets certain benefits from the TIC and the other gets other tax benefits. Check to see if there are any rent control law that apply or limitations on TIC's [I believe San Francisco does have a limit on the number allowed each year]. You are making a significant investment so do not save a few dollars and pay a lot more in the future because of some lack of knowledge.