Director of Tax Strategies
Mark Prendergast has over 35 years of experience in tax, estate and financial planning. He started his career in 1979 at Ernst & Young, and then joined Price Waterhouse in 1982. He acquired his Certified Financial Planner™ designation in 1988, has served as adjunct faculty at Reedley College and the CSU Fresno Foundation and regularly teaches on income and estate tax topics at professional conferences.
Mark served on the national Board of Directors for the Financial Planning Association from 2011-2013, and currently serves on the Advisory Board for The Center for Investment and Wealth Management at UCI. His service for the Financial Planning Association includes board positions and committee work for two local chapters, and at the regional, state and national levels. He has also served on the Editorial Review Board for the Journal of Financial Planning since 2002.
Over his career, Mark has served many roles in non-profit organizations, including the Board of Directors for New Life for Girls (women’s recovery home), The Birthing Center (birthing advocacy group), Valley Christian Center (church), and Fresno New Connections (a substance abuse clinic).
Mark is married to Evelyn Zohlen, and they truly enjoy life’s adventures together from work-to-travel-to-Disney-and beyond! Hobbies include world travel and distance running, having run 20 marathons in his life. He misses their three adult children who live too far away for his pleasure: Alison (MBA), Josiah (JD), and Martha May (RN/MSN), all successfully launched in their careers.
Assets Under Management:
A single member LLC is a tax-neutral entity--technically referred to as a disregarded entity. For federal purposes, no tax return needs to be filed for the LLC; any tax-related activity just gets reported on your personal tax return. For example, when you sell the property, the capital gain or loss is reported on Schedule D (or one of its subsidiary forms). So the answer to your question, "no" you will not have to pay a higher tax upon a profitable sale. It looks like you are in the state of Washington with no state income tax, so state tax issues should not be an issue. That said, I am unfamiliar with Washington tax law with respect to LLCs. (In California, you would be paying an annual $800 to keep the entity alive.)
Putting the land into the LLC will offer you some "asset protection". Again, it's a state law issue and protection varies state-by-state in terms of whether a single-member LLC provides legal protection. Let's say a child builds mounds on your property without your knowledge and breaks his neck by riding his BMX. It would be nice to protect yourself from being sued.
Tax deductions. You say you have $-0- income. If you did file a tax return and itemized your deductions (medical, property taxes, mortgage interest, charity), you would deduct the property taxes on Schedule A. Here's an idea: under Code Section 266, you can capitalize the property taxes on this property rather than deducting them. Rather than paying the property taxes over the years and saying, "well, I got no tax benefit from paying them", you can add the property taxes to your cost basis and reduce your capital gain down the road. This would require you to file a tax return with no income, but making the election under Section 266. Try a web search of "IRC Section 266 Carrying Charges" and see what that gets you. If this vacant land and there are other expenses of maintaining it (clearing brush annually per local fire prevention rules, etc.), those likewise would fit into the concept of "carrying charges". And don't be afraid to read the Internal Revenue Code. Read Section 266 . . . and if you get into the Regulations, they will probably give you some examples so that you can better understand that concept. It might seem strange to file a tax return showing no income and no deductions, which is what you'd do, and attach a statement saying "Under Section 266, I hereby elect to capitalize the carrying costs on property described as 123 Main Street, which include property taxes of $822 and property maintenance of $500." Then keep a record of your receipts to prove the accumulation of those costs over the years.