Ownership Options
An investor has a number of options in taking title to income property. Common methods for taking and holding title include:
- As an individual. This method also includes joint tenancy (JT) and tenants-in-common (TIC).
- In a retirement account.
- As a corporation (LLC, C Corp, or S Corp)
- In a trust
Investors can also take title in a partnership. The features of this method depend upon the partnership agreement. The table compares several common options for taking title.
|
Feature |
Individual (includes TIC and JT) |
Retirement Account |
Corporate (LLC, S Corp, C Corp) |
Trust |
|
Mortgage Loan |
Investor uses individual SSN to record a loan. Must qualify for loan as an investor, not owner-occupant. |
Conventional mortgage loans not available to retirement accounts. Non-recourse loans are available. |
Conventional mortgage loans typically not available to corporations. |
Conventional mortgage loans typically not available to trusts. |
|
Title |
Individual, JT, or TIC |
Trustee for self-directed retirement account sets title format |
Corporation takes title directly |
Trust takes title directly |
|
Tax Considerations |
Deductible against personal income |
Income not taxed, so no deductions. |
Tax deductions allowed |
Tax deductions allowed |
|
Inheritance |
Established by trust or will. Tax basis steps up. |
Set by account beneficiaries. |
Not applicable |
Set by trust. Tax basis steps up. |
|
1031 Tax-Deferred Exchange |
Allowed |
Not applicable. |
Allowed |
Allowed |
The investor should check with a legal advisor and a tax or financial advisor before purchasing income property, especially for a trust, corporation, or retirement account.