All Forum Posts by: Bill Walston

Originally posted by Aaron McGinnis:

Better idea -

A C corp to handle the business of flipping houses. You own it via stock and run it as the CEO. You take a smallish W-2 as an officer.

An S corp that gets paid by the C-corp, which then flows through on a K1 to you. You take a small W-2 from this company as well... as an officer.

Maximum liability coverage. Minimum tax burden. As an added bonus, you get to laugh in the face of the IRS at the end of every year.

Why do you consider this to be a better idea Aaron? Why use two corporations when just the one (S-Corp) would accomplish the job? And most advisers that I have worked with recommend an LLC taxed as an S-Corp over either.

Originally posted by Steven Hamilton II:

IF you don't know what an EA is. He is the one that is supposed to be preparing your tax return and you CPA is supposed to do the books.

That's what I hear too Steven. The CPA plans the strategy, oversees the accounting process, and classifies the expenses and deductions so the EA can put the numbers on the return. :wink:

Originally posted by Michael Sherwood:

can we just split all expenses and income 50/50?

Do you guys have a 50/50 partnership? You say that all income and expenses are run through a business partnership checking account - does this include the mortgage payments on both properties? Are you not filing a 1065? If so, all income/expenses can be allocated 50 -50 (including the mortgage interest).

Originally posted by Kyle Meyers:

Originally posted by Bienes Raices:

Does this mean no 1099s or just that they will not have to be issued to corporations?

About those 1099 changes....well..never mind! We are now back to square one. Landlords who report rental properties on Schedule E will NOT have to issue 1099s.

And those real estate investors who are issuing 1099s now will continue to issue them only to INDIVIDUALS to whom they pay $600 or more - and only for services, not products.

On April 5th, Congress voted to repeal all of the provisions enacted in both the Small Business Jobs and Credit Act of 2010, AND the H.R. 3590 Patient Protection and Affordable Care Act. Legislation (HR 4) has passed both the House and Senate and has been sent to the President for signature.

Hi Robert - Have you tried expired listings or absentee owners? I've found both to be excellent lists. You will need access to the MLS for the expireds. The absentee owners list can be purchased from ListSource or Melissa Data. You might also be able to get them at no cost from your county clerk or tax assessor's office, so you will probably want to check there first.

Originally posted by Babs Wagner:

Has anyone ever heard of having to get a rental appraisal in order to credit back part of the tenant-buyer's rent as a seller concession? Our mortgage broker told us we would need this.

Hi Babs. Yes, this is a requirement of some lenders. Only the amount in excess of the FMR can be used as seller concessions (rent credits). If the rent being charged the tenant-buyer is FMR or lower, no rent credits are allowed. A good broker can tell you if this is required and get you in touch with someone who can do the appraisal for you.

Originally posted by Dawn Vought:

Thanks for the clarification. For 2011, if I pay a contractor, for example, who is a corporation (and not just a sole proprietor) for some repairs or rehab work and the check is made out to the corporation, is a 1099 still required?

Not for 2011. Only payments of $600 or more to individuals will require a 1099. (An exception to this however is a payment to an incorporated attorney, which does require a 1099.)

If your phone is a personal phone you would not need to issue a 1099 as the requirement is for business to business transactions. As for Home Depot, unless the law is repealed, yes, a 1099 will be required.

Originally posted by Jeff Sielicky:

My accountant says to get tax ID info BEFORE the job starts because contractor may be reluctant to give info after job done. And yes do it now tax year 2011, according to him.

Spot on Jeff! You can grab that info on a W-9. If you need a copy you can get one here: http://www.irs.gov/pub/irs-pdf/fw9.pdf

Deanna,

The requirement for LANDLORDS to issue 1099 forms IS a requirement for 2011.

The reason for much of the confusion, I think, is that for most landlords 1099 forms have never been an issue. Until the passing of the Small Business Jobs Act of 2010 only taxpayers whose real estate activities were considered – for tax purposes – to be a trade or business were required to issue 1099s. That excluded most of us who own rental properties. Our rental activities had always been treated as engaging in a “passive activityâ€â€“ not a business. No 1099s required, thank you very much.

For 2011, that has all changed. The provision in the Small Business Jobs Act subjects all of us who receive income from rental real estate to the same information-reporting requirements as taxpayers engaged in a trade or business. This means that you will need to issue a Form 1099 to any unincorporated service provider that you pay $600 or more in a calendar year. You will also need to furnish a copy to the IRS. In other words, landlords now have to comply with the same rules as any other business person as they apply to 1099 forms. This will apply to payments made after Dec. 31, 2010, and will cover, for example, payments made to plumbers, painters or accountants.

In 2012, the Health Care Reform Act rules kick in, and the 1099 will function as a tax form for ALL business to business transactions. In a nutshell, you will have to issue 1099s whenever you do $600 or more of business with another individual or entity in a year.

Hope this helps!

Great selection of posts Steve. Thanks for sharing :-)