What is equity sharing? Kiritsis Law Group 212 922 0005

May 13, 2021

By: John Kiritsis, Esq., CPA, MBA, MS, JD, LL.M

Generally, it refers to a form of joint co-ownership between an owner who occupies the property for his own use, and an owner who owns the property as an investment. When the property is sold, both co-owners will divide the profits. During the co-ownership will get proportional tax writes off for taxes, and interest, and treat a portion of his monthly payments as rent; on the other hand, the investor co-owner will receive depreciation tax deductions, based on his ownership share. Recent tax law changes, have reduced the attractiveness of equity sharing, in lieu of alternative tax strategies. Ideally, the end result of equity sharing, is to be mutually beneficial through the maximization of profits, and by reducing and/or deferring the potential tax burden. The rise of limited liability companies (even if single member) made it easier to achieve limited personal liability, and passthrough taxation, without the need of owner occupants. The legality and the ability for party(ies) to enter into equity sharing agreement vary wildly, depending on the jurisdiction, as well as, the specific underlying facts of a particle or case.

 

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