Consider this scenario: After buying a condo and living in it for several years, Sue meets Steve, marries him and moves into his house. Because the rental
I own rental property in an LLC. Can I spend profits from that property on personal items/services that have nothing to do with that property or other real estate investment? Are there tax related reasons to not do this?
Yes and Yes.
An LLC is a company- a Limited Liability Company.
It has income, expenses and profit.
You deduct the expenses from the income, and what is left is the company profit.
If you own the company, the profit is yours.
You can do anything you want with it.
However, if you have not accounted for Cap Ex, then you probably want to hold the profits, or some of the profits.
“Cap Ex” is Capital Expenditures.
Capital Expenditures are those major expenses that occur every three to five years such roof repair, or furnace, or new HVAC system.
These items can run $15,000 to $20,000 and then when you look at four years of accounting you see that you are operating at a loss, even though you were showing a good profit for the months and years before the Cap Ex happened.
This is why good managers estimate a monthly amount for these occasional and random expenses and put it aside so that they don’t have a disaster when the expense occurs.
The set-aside amount is not tax-deductible but it will save your bacon.
I hope this helps.
Michael Lantrip, Author of “How To Do A Section 1031 Like Kind Exchange.”