<p>Posting under a new user name because of paranoia about disclosing financial info online. :(
Hoping those with this specific situation can offer some insight.</p>
<p>We hold income property in an LLC. Our family trust is the single member of the LLC. FAFSA asks for value of property owned that is not primary residence. Technically, we don't own the property, we own an investment in the LLC. FAFSA also states (if I'm understanding this correctly) that you don't have to list the value of your business, if the business has less than a certain amount of employees. Wouldn't the LLC qualify - it has no employees?</p>
<p>I did list this investment in our assets on my estimated FAFSA, but now I'm thinking that maybe I shouldn't have?</p>
<p>In the past I have read that the income property which is exempt would be real estate where you provide services like maid, etc. So, owning a small motel, inn, B&B would fit that.</p>
<p>It seems like everything I have read (and I do not claim to be an expert or up to date, but only hoping to give you a place to start more research) says that owning rental houses etc is not exempt</p>
<p>You said it was “income property”…do you mean “income producing”? If so, the pass through income from the property is reported while I believe the “value” of the LLC is exempt and not reported. The FAFSA “family” must “own” more than 50%. But I would read the fineprint on the FAFSA site to make sure.</p>
<p>Disclaimer: we looked at this (creating an LLC for the rentals) back in 2005 or so before S1 was ready for college and wanted to know how it would impact our taxes, college etc, so what I remember might have changed.</p>
<p>Does the family trust own the LLC, and you are beneficiaries of the trust? In that case I would say you don’t own a business at all, and I think you have to report the value of the trust as an asset.</p>
<p>I found this page, but it is not all that helpful:</p>
<p>[FinAid</a> | Financial Aid Applications | Small Business Exclusion](<a href=“Your Guide for College Financial Aid - Finaid”>Small Business Exclusion - Finaid)</p>
<p>How is the income flowing through to your personal tax return? Are you filing schedule E? If so I don’t think you can claim it is a business.</p>
<p>This is a gray area for sure. I think the trust muddies the waters even more.</p>
<p>This is just my opinion, I am not an expert.</p>
<p>My sister just went through this. The LLC does not shield you. It’s an asset and you report it as such and report the income. Bummer! But it would be too easy for everyone to do, you can set up an LLC on line in a half hour.</p>
<p>Thanks for your replies, so far. This website seems to give the clearest explanation I have found. I just hope it is correct. </p>
<p>from: [FinAid</a> | Financial Aid Applications | Small Business Exclusion](<a href=“Your Guide for College Financial Aid - Finaid”>Small Business Exclusion - Finaid)</p>
<p>“If the business is incorporated (e.g., C corporation, S corporation, LLC), the “significant services” requirement does not generally apply. Incorporating the business avoids many questions about whether it really is a business or not. However, the rental property must be owned by the business in order to be excluded, as the small business exclusion only applies to the business and its assets. The small business exclusion does not apply to assets that are managed by the business but not otherwise owned by the business. If the deed to the property is in the family’s name, it is a personal asset and must be reported as an investment asset on the FAFSA. If the deed is in the name of the business, then it can be excluded on the FAFSA if the small business exclusion applies. For example, if the family owns a property which it rents to the business, that property is reported as an investment asset on the FAFSA because it is owned by the family, not the business.”</p>
<p>Based on this, I think it can be excluded, because we own more than 50% and net income (I wish! since we spent 2010 re-habbing the property, it will be a net loss) is reported on a schedule C. The LLC owns the property. The trust only owns an investment in the LLC.</p>
<p>I still hope to hear from someone who used this exclusion and had it pass muster.</p>
<p>BTW, the question isn’t whether the income is included. I know that any income or loss would be included in our AGI. It is a question of whether the investment needs to be included in Assets for FAFSA purposes.</p>
<p>You can set up an LLC in 1/2 hour, but the key is placing the deed to the property (and any related mortgages) in the name of the LLC.</p>
<p>But wouldn’t you have to list the FMV of the trust asset under investments? The big picture is, you own something that has value, so why wouldn’t it be reported on the FAFSA? </p>
<p>Is it a grantor trust?</p>
<p>As I mentioned, I did take that approach and listed it on my FAFSA, but the more I read, the more I believe that I shouldn’t have.</p>
<p>What the trust owns is a “small business”, and there is an exclusion for small businesses, as I read it.</p>
<p>Is it a grantor trust?</p>
<p>It is a Revocable Living Trust. Does that matter?</p>
<p>So, the revocable living trust is the single member of the LLC and it holds income property, which I assume is a rental property, and you reported the investment on your FAFSA. </p>
<p>What kind of rental property is it? (Why is it reported on Schedule C and not Schedule E, page 1)?</p>