Cash Out - income for tax purposes?

[willertel]

What is the name of your state? north carolina

If an LLC buys a commercial property and receives cash back as part of an upfit allowance - is the cash received considered income for tax purposes? If not, how is it treated for tax purposes?

 

[irsos]

Cash Out

It is treated as a reduction in basis.

Mike Wellman
IRSOS.com

 

[LdiJ]

What is the name of your state? north carolina

If an LLC buys a commercial property and receives cash back as part of an upfit allowance - is the cash received considered income for tax purposes? If not, how is it treated for tax purposes?

No, its not income, because in all reality its proceeds from the mortgage on the property. Initially it reduces your purchase price on the property, therefore reducing your basis. However, when you do the necessary work on the property, it then brings the basis back up.

 

[FlyingRon]

It probably doesn't apply here since you didn't mention it, but you need to be VERY careful in this type of situation if you are doing a 1031 exchange. You're not permitted to get any boot out of the transaction.

 

[jontrresko]

I'm in CA

Property in Utah

What if an individual does a similar purchase, extracting about $3.5m...

What are the tax liabilities?