All Forum Posts by: Bob Norton

@TJ Scott Then you probably will not have to pay any tax on that gain.  The $500k exclusion is pro rated by the time you are in the house.  So 1-1/2 years out of 2 years is 75%, which means your exclusion will be up to $375k.  As I said, run this by your tax advisor to confirm.

@TJ Scott It depends upon the amount of the gain.  If you have lived in the house for over 2 years, then there is no taxable gain on the first $500k for a married couple under Section 121 of the tax code. Even if you have lived in the house for less than 2 years, then part or most of the gain may be excluded from tax due to unforeseen circumstances.  You should talk with your tax advisor.

@Julia Bobe The answer is yes.  And, it's at a higher tax rate, since you will be paying SE taxes on that income as well.  

Most agents negotiate the price down (for buying) or up (for selling) by not including a commission for themselves in the purchase or sale of their personal residence.  They may have to include a minimum amount of commissions for their broker's fee, but that won't be reported to them as a commission since their broker keeps it.

This way the commission they would have received is either received as a capital gain when they sell (tax-free under Sec 121) or adds to their equity when they buy and any future capital gain when they sell in the future.

Capital gains are taxed at lower rates than earned income, so negotiating price for commission is the best way to go.

@Blake Schreckhise Great job!  Great strategy for building tax-free wealth.  How do you feel about moving every two years?

@David Bertolaccini Make sure you speak with an attorney and a CPA to make sure that you setup the trust properly so that your parents aren't gifting you and your siblings the property before their death.  If this occurs, then your basis in the property is not stepped-up and you may have to pay more taxes when you decide to sell it. 

@Ann A.  I have the name of a specific person to recommend in GA.  However, you can search the directory on BP for a real estate specific CPA near you.  Good Luck!

@Ann A. I have clients that have lending companies that do what you are seeking.  You should consult with your CPA.  Interest income is generally not earned income and subject to SE taxes; however, interest earned by a lending company would be earned income and subject to SE taxes.  So, you should consider the pros and cons of such a strategy.

You can protect yourself from liability by requiring your friend to purchase a liability policy and name you as an additional insured.

@Charlie Van Norman You are only going to find generalizations, because the partnership split is whatever the partners want it to be.  If both are putting up half the cost, then the basic split would be 50/50.  However, the active/managing partner's efforts have value, so the partners should agree on a percentage that the active/managing partner gets first, then split the rest.  For instance, if that's 10% of the profit, then the split would be 10%+45%=55% to the active/managing partner and 45% to the investing partner.

You should hire a lawyer to draw up the partnership agreement.  It will be worth the money, especially if things don't work out the way you planned and there is a dispute between the partners.  Make sure you hire an attorney who has experience in real estate partnership agreements.

@Account Closed You get to deduct your rental losses AND take the standard deduction.  These are not mutually exclusive.  Rental expenses are not claimed on Schedule A (itemized deductions), which goes away for most taxpayers.  Rental expenses are reported on Schedule E, and most taxpayers can deduct up to $25k in rental losses against their W-2 income.

When my properties need repair, I point and write checks.  Saves a lot of time.

I also have clauses in my leases that the tenant is responsible for minor maintenance, like @Karl B.