The scenario is that individual I is a member of LLC L, and L owns property P. L distributes profits and losses to I. I rents P from L.
An obviously significant free variable is how much rent L charges I.
If the rent I pays to L results in an increase in the profits of L, would I be liable for an increase in taxes from the distributed share of those profits? If L is operating at a loss, and I is paying rent substantially below market rate (say 1USD per month), what could the tax-related consequences be?
Edit: This is not homework. I am not currently a student. If it helps stimulate answers, consider first the general case where an LLC's member is also a customer of the LLC (not necessarily related to real estate); second, the case where the member's expense would have tax implications for the member independent of their membership in the LLC; and third, the case where the tax implications arise due to their membership (e.g. home office or commercial property for a non-competing company). I recognize that this question may also have other legal or ethical implications that are explicitly not in scope.