Leveraging the short term tax loophole for cost segregation qualification

Tax, SDIRAs & Cost Segregation
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Leveraging the short term tax loophole for cost segregation qualification

Jesse Fernandez
West Hempstead, NY · Member since 2017 · 37 posts · 7 votes

I am looking to take advantage of cost seg for a  2 unit MF property - which has tenants for long term rental  (let's call this property A)


I know that in order to take advantage of cost segregation, there are no specific "status qualifications" per se, but certain conditions and considerations should be met such as 1) having a real estate prof status (i.e., spending more than 50% of working time & 750hrs pr yr in RE business) or 2) short-term rental status, rentals with a duration of less than 30 dys)


I do not qualify with a RE prof status, but I will be acquiring another property with the purpose of having it for short term rentals (property B), please note that this property is outside of the U.S., so my question is: 


I don't qualify as a RE professional status, but can I use the acquisition of the short term/property B as my "short term rental tax loophole" for the purpose of the cost seg on property A? Or does it only apply to the short term rental property only? 

Thank!

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  • Account Closed
    Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
    2y

    Hey Jesse, 

    take a look at this article I wrote on the short-term rental loophole. that maybe able to help. You maybe able to get away with "material participation" and leave it at that.https://www.biggerpockets.com/forums/617/topics/1161394-call...

    0Reply
  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    2y

    @@Jesse Fernandez

    The article written by another investor is not reliable. Here is an article written by an experienced tax professional: https://www.biggerpockets.com/forums/51/topics/1122635-the-s...

    0Reply
  • Account Closed
    Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
    2y
    Quote from @Michael Plaks:

    @@Jesse Fernandez

    The article written by another investor is not reliable. Here is an article written by an experienced tax professional: https://www.biggerpockets.com/forums/51/topics/1122635-the-s...


     Michael, I dont think its a good look for you to call someone "not reliable" without citing your point of view. At the end of the day, you should meet with your tax professional to discuss these matters and trying to nitpick my response to get people to go to your article i dont think is fair or decent.  

    0Reply
  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    2y
    Quote from @Account Closed:
    Quote from @Michael Plaks:

    @@Jesse Fernandez

    The article written by another investor is not reliable. Here is an article written by an experienced tax professional: https://www.biggerpockets.com/forums/51/topics/1122635-the-s...


     Michael, I dont think its a good look for you to call someone "not reliable" without citing your point of view. At the end of the day, you should meet with your tax professional to discuss these matters and trying to nitpick my response to get people to go to your article i dont think is fair or decent.  


    I did cite my "point of view" by linking my own long post. I also responded to you on your original post, detailing your errors and omissions. 

    This was not personal. I am a tax professional, and I care about accurate information. What is not "fair or decent" in my book is to post about taxes when you do not have a full grasp of the issues. It's like me writing about a medical condition and then getting upset with a doctor who finds my post lacking.

    Short summary of the issues with your post:

    1. REPS (real estate professional status) is completely unrelated to STRs.
    2. Substantial services are not part of the requirement and could actually be counter-productive.
    3. Material participation test is critical and has 7 ways to be met, 3 of which are what is used for STRs.
    4. STRs only provide tax benefit for one year.

    0Reply
  • Account Closed
    Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
    2y
    Quote from @Michael Plaks:
    Quote from @Account Closed:
    Quote from @Michael Plaks:

    @@Jesse Fernandez

    The article written by another investor is not reliable. Here is an article written by an experienced tax professional: https://www.biggerpockets.com/forums/51/topics/1122635-the-s...


     Michael, I dont think its a good look for you to call someone "not reliable" without citing your point of view. At the end of the day, you should meet with your tax professional to discuss these matters and trying to nitpick my response to get people to go to your article i dont think is fair or decent.  


    I did cite my "point of view" by linking my own long post. I also responded to you on your original post, detailing your errors and omissions. 

    This was not personal. I am a tax professional, and I care about accurate information. What is not "fair or decent" in my book is to post about taxes when you do not have a full grasp of the issues. It's like me writing about a medical condition and then getting upset with a doctor who finds my post lacking.

    Short summary of the issues with your post:

    1. REPS (real estate professional status) is completely unrelated to STRs.
    2. Substantial services are not part of the requirement and could actually be counter-productive.
    3. Material participation test is critical and has 7 ways to be met, 3 of which are what is used for STRs.
    4. STRs only provide tax benefit for one year.


     Michael, if you were to read my post you would see : 
    1. I never compare REPS to STRs
    2. While you can debate this substantial services stuff, its in the end subjective, and nuance is needed here for a specific client situation, this is no fault of the article. 
    3. I didn't explicitly list all 7 ways to meet material participation, that makes the article "wrong" to you? 
    4. STR only provides tax benefits for one year being left out does not make the article wrong. We do this all the time and this seems obvious to us, and this always comes up during a client call.

    We ALWAYS turn over every stone with a client to make sure the strategy we are employing is a proper fit to them.

    The fact that you attacked my article and tried to promote yours based on these minor at best (nonexistent issues IMO) Is not a good practice and not a good look to folks. As we are in the same business you know there are plenty of fish in the sea and you don't need to attack me to try to win over clients. 

    0Reply
  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    2y
    I did not attack you, I corrected your post.

    And I did not even identify you as a tax professional. Your title says "investor" which I assumed you were: 

    You being a tax pro removes any excuse for you posting inaccurate information.

    0Reply
  • Sean O'KeefePro Member
    CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes
    2y

    Michael Plaks throwing down the knowledge here and getting scrappy - I like it!

    [email protected]628-241-0888
    0Reply
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