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Michael Plaks#1 Tax, Legal Issues, Contracts, Self-Directed IRA Contributor
  • Tax Accountant / Enrolled Agent
  • Houston, TX
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How to test your CPA's technical competence

Michael Plaks#1 Tax, Legal Issues, Contracts, Self-Directed IRA Contributor
  • Tax Accountant / Enrolled Agent
  • Houston, TX
Posted Jan 10 2020, 09:17

One of the most common frustrations when choosing a real estate savvy CPA is not knowing how to tell whether he knows his stuff. Here're some sample questions to test his technical competence, in any order:

  1. We're making $200k in salaries between myself and my spouse. Can we reduce our taxes with tax write-offs from rental properties? (Answer: no)
  2. If we hold a rental property for 5 years and it doubles in value, is there any way to not pay capital gains taxes when we sell? (Answer: yes)
  3. If we buy fixer-uppers to rebuild and sell, and construction takes more than one year - will our profit be taxed as long-term capital gain? (Answer: no)
  4. Can we lend our IRA money to other real estate investors? (Answer: yes)
  5. We both have full-time jobs. Can we qualify as "real estate professionals" if one of us obtains a Realtor license? (Answer: no)
  6. If we buy new appliances for our rental property, can we deduct the full cost of appliances right away? (Answer: yes)
  7. If I had a rental property for 3 years and never claimed depreciation, can I fix this mistake by filing amended tax returns for the last 3 years? (Answer: no)
  8. Can I deduct 100% of the property taxes on my rental properties if they are higher than the new tax law limit of $10,000? (Answer: yes)
  9. If I own my rental property free and clear, and I then get a mortgage against this rental and use the money to buy a boat - can I deduct interest on this mortgage? (Answer: no)
  10. If I convert my old house into a rental for 2 years, and then I move back and live in the house myself for 2 more years, do I have to pay any taxes when I sell it? (Answer: yes)

Of course, the answers above have some exceptions, like almost any question. But then the CPA should say something like: usually yes (or no), except in some special cases.

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