All Forum Posts by: Ashish Acharya

That sounds like an exciting first step, congrats on getting under contract! From the tax side, here are a couple of things to keep in mind:

• Since part of the property will be a rental, you’ll be able to write off a share of expenses like insurance, property taxes, repairs, and even depreciation. That can help offset the rental income.
• You’ll just need to split those expenses between the part you live in and the part you rent out (usually based on square footage).
• Most people starting out don't bother with an LLC right away. It won't really save you on taxes—it's more of a liability protection tool. You can always revisit that once you've got more rentals.
• On the updates—roof, HVAC, solar, etc.—those will mainly help you by reducing future maintenance costs. The rental portion of improvements is depreciable, which can give you some extra tax benefit.

Sounds like a great learning property that can give you both equity and experience. The main thing is to keep good records of your expenses from day one—it’ll make tax time way easier.

Wow, I can only imagine how frustrating it must be to not only lose money on the deal but also feel stonewalled when it comes to getting back paperwork. K-1s should generally be issued each year, even if there’s no income, because they track your capital account and basis. Without those, it makes it much harder to document your loss properly.

Here are my thoughts on your questions:

1. Getting the missing K-1s – Unfortunately, if the sponsor isn’t cooperating, you can’t force them to issue past K-1s directly. Sometimes the best path is to reconstruct your basis using your original investment documents, capital call notices (if any), and any correspondence that shows contributions or distributions. A CPA can help recreate what those K-1s should have looked like so you’re not stuck.
2. Reporting him to the IRS/SEC – This can put pressure on the sponsor, but it usually won’t get you the forms you need in the short term. It’s more about compliance and accountability than solving your immediate filing problem.
3. Not including the 2024 K-1 – Leaving it out means you won’t be able to take the loss, and it could raise red flags if the IRS later receives the sponsor’s filings. It’s usually better to include it, even if you have to footnote or attach an explanation about missing prior-year K-1s.
4. Worthless investment – Yes, if the foreclosure wiped out your stake, you may be able to treat it as a worthless partnership interest or a Section 1231 loss. The exact treatment depends on the specifics of your partnership agreement and how the sponsor reported things, which is why reconstructing your basis is so important.

Bottom line: you’re not stuck forever just because the sponsor isn’t cooperating. With the proper documentation and a little legwork, you can establish your basis and claim the loss.

Wow, I can only imagine how frustrating it must be to not only lose money on the deal but also feel stonewalled when it comes to getting back paperwork. K-1s should generally be issued each year, even if there’s no income, because they track your capital account and basis. Without those, it makes it much harder to document your loss properly.

Here are my thoughts on your questions:

1. Getting the missing K-1s – Unfortunately, if the sponsor isn’t cooperating, you can’t force them to issue past K-1s directly. Sometimes the best path is to reconstruct your basis using your original investment documents, capital call notices (if any), and any correspondence that shows contributions or distributions. A CPA can help recreate what those K-1s should have looked like so you’re not stuck.
2. Reporting him to the IRS/SEC – This can put pressure on the sponsor, but it usually won’t get you the forms you need in the short term. It’s more about compliance and accountability than solving your immediate filing problem.
3. Not including the 2024 K-1 – Leaving it out means you won’t be able to take the loss, and it could raise red flags if the IRS later receives the sponsor’s filings. It’s usually better to include it, even if you have to footnote or attach an explanation about missing prior-year K-1s.
4. Worthless investment – Yes, if the foreclosure wiped out your stake, you may be able to treat it as a worthless partnership interest or a Section 1231 loss. The exact treatment depends on the specifics of your partnership agreement and how the sponsor reported things, which is why reconstructing your basis is so important.

Bottom line: you’re not stuck forever just because the sponsor isn’t cooperating. With the proper documentation and a little legwork, you can establish your basis and claim the loss.

For Real Estate Professional Status the IRS requires a contemporaneous detailed log showing date hours property and activity performed. Any clear format works such as spreadsheet app or paper as long as it is accurate and credible. Operational tasks such as leasing tenant communication maintenance oversight and showings count. Investor or administrative tasks like bookkeeping and reviewing financials do not. There is no official IRS form so the best practice is to use a simple spreadsheet or tracking app you can update regularly and retain for audit support.

Actively performing plumbing work for remodels, new construction, and commercial projects qualifies as a real property trade or business under the IRS definition, as these activities fall under construction or reconstruction. For example, installing plumbing systems in new buildings, remodeling existing structures, or working on commercial developments directly contributes to real property projects and thus counts toward REPS eligibility.

Operating the Plumbing Company as an Owner

Operating a plumbing company as an owner may qualify as a real property trade or business, but only to the extent that your activities are directly tied to real property projects. For instance:

• Qualifying Activities: Managing or supervising plumbing work for construction, remodels, or commercial projects (e.g., coordinating with contractors on real estate developments) counts as part of a real property trade or business.
• Non-Qualifying Activities: General business management tasks, such as handling payroll, marketing, or administrative duties not specifically related to real property projects, do not qualify.

If your company’s work primarily involves real property projects (e.g., plumbing for new construction or remodels), and your role as an owner includes overseeing these projects, those specific management activities would qualify. However, if your company also performs non-real estate-related plumbing (e.g., residential service calls for repairs), those activities do not count toward REPS.

Key Distinction

• Active Plumbing Work: Directly performing plumbing tasks for remodels, new construction, or commercial projects unequivocally qualifies as a real property trade or business under the construction/reconstruction category.
• Operating the Company: Your role as an owner qualifies only when your activities are directly connected to real property projects. General business operations unrelated to real estate do not count.

There are a lot of great CPAs here who specialize in short-term rentals on here. From my experience as an investor and working with many others, solid bookkeeping is key when it comes to tracking expenses, deductions, and actively managing your financials can make a big difference as you scale. Meeting material participation rules is also huge, dont miss out on QIP tax savings for STRs, and a good CPA can guide you through all of that.

Planning improvements or new furnishings strategically can impact which tax year you claim deductions in and help you reinvest more effectively.

On another note, Tennessee is a great state for STR investing. I've heard a lot of great things about cities like Nashville, Chattanooga, Pigeon Forge, and Gatlinburg, which offer cool properties and rental potential, making it an exciting market for growth.

Hey! Welcome to the BP community! Real estate is one of the best things you can invest in, besides investing in yourself. I agree with all of the replies above. You want a CPA who’s as passionate about real estate as you are and keeps up with market changes, laws, and strategies. 

A key first step is figuring out which of your earnings are passive versus non-passive, so you can plan your investments and taxes wisely. 

Huge opportunities with the recent law changes, and most of the CPAs on here have a nationwide reach. Excited for you

This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

Hi Pynne! Real estate is one of the best investments you can make, so I think you're off to a great start while "starting over," and house hacking is great for building long-term cash flow and equity. Starting later could actually be an advantage for you because you know what you want and can make better decisions. You're already in the right spot, being on BiggerPockets.

A duplex within 12 months is a very achievable goal if you stay organized, focus on financing options, and line up the right team (lenders, agents, and a CPA familiar with real estate so you don't miss out on tax-saving opportunities). Exciting things are in front of you! You’ve got this!

A Roth conversion gets taxed in the year you do it.

The IRS looks at your total income for the whole year to figure out your tax bracket, not just what you earn or don’t earn on the day you convert, and not what you made last year.

That means all of your income counts together. If you take a new job later this year, your wages will get added in, and the IRS will tax your Roth conversion based on your total 2025 income.

So even if you convert while unemployed, the conversion will not be taxed at zero. It will be taxed based on the final year’s income once everything is added up.

Your 2025 tax rate is decided on your full-year income, not the timing of when you do the conversion.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

I’ve actually seen this come up a lot, parents often want to help their kids get a head start with investing, and there are a few angles to consider.

The 2025 annual gift limit is $18K per person, so Mom could give $18K to you and $18K to your fiancée. Anything above that reduces her $15M lifetime exemption. She would need to file Form 709, but that is just reporting, not a tax bill.

A straight gift is the cleanest option and the only real cost is paperwork. A loan can work if she prefers structure, with IRS-required interest, but she could forgive parts each year under the annual exclusion.

For a one-time $200K transfer, trusts or custodial accounts are usually unnecessary unless her estate is near the threshold. Some families instead use LLCs or partnerships, which can also add liability protection.

Think about how the funds move. Will you receive them personally and use them for down payments, or form an LLC with your fiancée and have her contribute there? Using the money to pay off debt is not deductible, but it can still free up cash flow.

Other options like 529s, life insurance, or gifting appreciated stock are situational. For real estate, a simple gift or loan is usually best.

If her estate will not exceed $15M or $30M, the lump sum gift with a gift tax return is simplest. If estate taxes may be an issue, spreading gifts or using a trust can help. Either way, bringing these points to a CPA or estate attorney will make the conversation much smoother.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.