All Forum Posts by: Meagan Barkley

I am a CPA licensed in OK and AR. In my experience, we usually use the assessed value breakout for property taxes, lot sales in the neighborhood, or another reasonable value usually ranging from 10% to 20% for the land (for homes in residential neighborhoods). This can vary based on the location of the property. It is a gray area with no bright line test. You just need to be able to prove the method you used was reasonable.

I think asking a question on these forums allows investors to start the conversation with their CPA. It allows us to get general info, like from the article I linked to, so we can start an intelligent conversation with a professional to discuss our specific circumstances. By no means is this an attempt at tax advice.

What if all the questions about lending were answered "call your lender." That's just not very helpful. We can at least point fellow investors in the right direction.

You cannot use an estimate as cost basis. "Cost basis" is just like it sounds, what did it cost. Basis is what you paid for an asset.

If you are looking to increase your depreciation you may consider a cost segregation study. A cost seg. is done by a professional that breaks out the cost your building into parts so some of the cost can be depreciated over shorter lives.

Do you have funds in a retirement plan? My husband and I were following what we were told our whole lives, to utilize our 401k as much as we could. Once I got a job that doesn't match contributions, I quit  putting money in and he now only does the amount his company will match. We realized we don't want to be 60 before we can retire. It worked out well though, because banks will count those as reserves. We are 27 & 28 so it isn't a ton of money, but it's  enough that we have 4 properties and are looking for #5.

It appears that some are not aware of the new repair regulations which allow you to dispose of components of a building if they are replaced.

http://evergreensmallbusiness.com/partial-dispositions-and-the-new-tangible-property-regulations/

@Jason Heath The reason you aren't seeing a change on the federal return and you are on the CA return when looking at the AMT vs. regular depreciation is due to how the AMT works. When a taxpayer is subject to AMT they pay the higher of the AMT or regular tax. So it doesn't matter what your "regular" depreciation is if the AMT depreciation amount is kicking you into AMT. CA must not have and AMT and it is using the federal "regular" depreciation amount. (I am not familiar with CA tax law so I am not sure on this).

Usually for rental assets, the bulk of the assets do not have an AMT adjustment. 27.5 year and 39 year assets do not have a depreciation difference for regular and AMT depreciation. You will see it on shorter-lived assets though. The difference you mention seems to be caused by missing out on those first years of depreciation.

You may have to look to a larger firm for them to feel comfortable with the 3115.

CPA licensed in AR and Ok. My understanding was that SE tax was charged on rental income from inventory (aka flip) properties that are subject to SE income upon sale. It is not charged on properties you hold as rentals. One reason people split these into separate entities is to make it more difficult for the IRS to challenge why you purchased a certain propery (to flip vs. Rent).

https://www.irs.gov/Individuals/Tax-Trails---Self-...

This says SE tax is due on rental income earned in your "ordinary trade or business" which I believe can be separated from passive rental investments. I will take a look tomorrow at work and see if I can find anything with more specific examples/wording.

CPA licensed in AR and OK. I'm not sure as to the CA rules. The federal rule is, depreciation must be recaptured up to the amount "allowed or allowable," meaning whether you took the deduction or not. When we get clients who have not taken depreciation in prior years, we take a 481a adjustment to "catch up" the amount they have missed and make an accounting method change on Form 3115. Take a look at http://legacy.nafcc.org/index.php?option=com_content&view=article&id=110&Itemid=595. You may want to consider hiring a CPA to help you with this. 

CPA from AR, the rehab costs prior to holding the property available for rent should be capitalized to the cost of the building. 

The benefit is actually an exclusion of gain, not a "write-off."

There are situations where a partial exclusion (a prorated exclusion as you mentioned) is allowed. You can read up on them here https://www.irs.gov/publications/p523/ar02.html#en_US_2015_publink10009003.