Cheddar Stacker,
I'm helping a friend think through this rental purchase and I'm wondering if you can help? I'm a CPA but don't have a ton of experience on this side of things, only enough to be dangerous.
He is planning on purchasing a short-term rental property in Aspen, CO. The activity will be reported on Schedule C as a business because it's a short-term rental and will be operating like a hotel (I advised him that he needs to be charging sales tax, and should run it like any other business). He would like to purchase the property (with his wife) in the name of an LLC for liability protection. I thought yeah no problem and then started thinking about the elect-out partnership rules.
1) Am I correct that the partnership cannot be treated as elect out if the property is titled in the name of the LLC? That's how the IRS regs read to me.
2) You can't operate an LLC for liability protection without titling the rental in the name of the LLC, correct?
3) Should he purchase the rental in the name of the LLC and should he then be the sole member of the LLC so that elect-out is not an issue?
4) Will a lender have an issue with him titling the property in the name of the LLC? I'm assuming the down payment/closing money would need to come from an account titled in the name of the LLC?
Thanks for any help you or others well versed in this matter can provide.