How to split cost seg between partners?

[Sanjay Sharma]

I’m adding another forum question to my string of cost seg questions. 

I’m partnering up on a purchase. My spouse meets real estate professional status. The real estate partner does not meet status and will not qualify for the 25k write off due to his family’s income. 

I’m making up numbers.  If I do cost seg and identify 100k rapid depreciation/write offs, how do I split it with the partner. 

Do I take all of it and pay partner his portion off my tax savings? Do I create an entity/LLC where the tax savings goes back to the LLC?

what ideas do folks have?

@amandahan

[Ashish Acharya]

Originally posted by @Sanjay Sharma:

I’m adding another forum question to my string of cost seg questions. 

I’m partnering up on a purchase. My spouse meets real estate professional status. The real estate partner does not meet status and will not qualify for the 25k write off due to his family’s income. 

I’m making up numbers.  If I do cost seg and identify 100k rapid depreciation/write offs, how do I split it with the partner. 

Do I take all of it and pay partner his portion off my tax savings? Do I create an entity/LLC where the tax savings goes back to the LLC?

what ideas do folks have?

@amandahan

Unless you have a special allocation provision that is supported by substantial economic effect in your agreement, you both will take the cost seg depreciation/deduction allocation per your ownership percentage. 

Him not getting to deduct the net loss doesn’t mean you will take the entire loss. Also, the unallowed deduction will carry forward with his personal return. 

Little more complicated than this but you probably need tax advisor.