Taxpayer and wife place a personal residence in an LLC for liability purposes. The taxpayer is a lawyer. The property deed is in the name of the LLC. The property has a cottage which is a rental. The LLC reports the rental income and applicable expenses on a 1065. This is a new client so I have not reviewed the prior filed 1065s. Taxpayer and spouse have lived in one house on the property for the last 7 years and have rented the cottage.
The taxpayer question is : can he and his wife exclude ( section 121 ) the gain on the sale of the personal residence even though the house is deeded to the LLC?