All Forum Posts by: Chris Little

Thank you for everyone’s input. Truly helpful!

@Will Fraser – I was considering to post 2 situations in separate questions, as I figured together they might be confusing. And yes, DIY accounting was not my first choice. I called few local CPAs, but some were busy until the end of tax return season, and others did not sounded well-versed in RE returns, giving me the advice to submit 1065 form for LLC.

@ Michael Plaks

Yes, I validly started both business activities in mid-2020. The expenses I had (i.e. getting RE license expenses, property acquisition and repair expenses) are documented in 2020, so it is not something I could claim in 2021.

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Just to clarify on expenses to be claimed BEFORE the date I got RE license – like actual fee for a RE licensing course and setting up my office – are they allowed on Schedule C (its instruction is not very clear – well, I can go on and on how you need to be a PhD in Accounting just to do for your “simple” and mandatory tax return J)

Also, are the LLC start-up costs still considered passive loses too (due to that LLC holding an investment property?). Therefore, all my info on LLC goes to Schedule E and 8582, and not a 2nd Sch.C, correct?

Thanks again!

Looking for some advice on finishing my 2020 tax return.

Here is the situation:

In 2020 I became a realtor and also acquired an investment property. 2 different activities that need to be reflected on my tax return. I had no income on either one of them last year.

• – With RE agent activity – I am completing Schedule C for it. As I mentioned, no income in 2020, but have some this year, so want to make sure I do it right at start.
• - Do I count all my expenses from the date I got my RE license? Or can I include expenses prior to it (setting up office, educational expenses, properties search driving)?
• - I drove a lot (and kept my driving log) – I am in Arizona, where you could get 80 miles one way from Northwest Peoria to south east Gilbert. Will the fact that I did not make any profit put some audit prism on my driving log?
• -Do I need to attach any other form, in addition to Schedule C? I am participating in this activity as Sole Proprietorship.
• -I paid my teenage kid to create digital marketing materials for my realtor marketing. If I put in these expenses, I am responsible for payroll taxes? Form?

• - 2nd Activity – Investment Property. I bought this in LLC (Arizona), with intent to hold and sell shortly. Had some expenses, but no income in 2020. This year I decided to keep it longer and put it for rent. I assume 2020 losses are still consider a passive income? I meet active participation test, but won't be able to claim due to other income exceeding thresholds.

To carry forward these losses I need to do Schedule E, Form 8582. But do I also need Form 1065 & 8825 (because the property is held by LLC)? I did not think I needed the partnership return forms, because LLC would be a disregarded entity. However, one of the CPA I talked to today, said I do. Please share if claiming the partnership status will have some advantages with recouping the passive losses.

Really appreciate some guidance on the topic. 

Thank you Paul.

I passed my RE Salesperson exam and looking to activate my license. I am mainly looking to buy/sell properties for myself, but don't mind to do occasional regular retail sales as well. I would appreciate a recommendation for a local broker who I can have my license with and who allows to work on a fee-per-transaction basis. Thanks!

Thank you Craig for your reply and for suggesting Steward Title. I also was suggested to work with First American Title. Will get in touch with both of them to check, once decide how to proceed. 

Lender is not my primary concern. I am more undecided if I should go with the foreclosure auction, as the property is listed as occupied. And with the latest moratorium on eviction, I am not be able to pursue any legal action until next year. Any thoughts? Additionally, I really want to avoid any nasty surprises once getting the property, as I have no idea who the occupants are. 

Also, as I am a total newbie in the foreclosure process and the auction, I would have to compete against some experienced folks there. I understand I would have to bid above minimum, but would appreciate some feedback on what the ultimate calculation should be to get to the right max bid.  

As a side question - anyone in Arizona has experience with Auction.com at Maricopa County Courthouse? Is it still done in person, even with Covid? I called them, they told me I could do it online too, if I get their mobile app, but it appears not to be correct.

I am new to the forum, but found many helpful insights by reading your postings. I am looking to buy a property in the specific area in Phoenix (investment for first 5 years and primary residence after). Not many good options available there, but one came up as a foreclosure to be auctioned in Maricopa County Court house by Auction.com.

I am not an experience investor, and all the horrors stories about Auction.com made me uneasy. I have done some research on the property and outstanding debts. In addition to the 1st mortgage that been foreclosed by Trustee, it also has 2nd mortgage, a couple of HOA liens and few more medical and mechanical liens. Also, the owner had bankruptcy in 2017. If I decide to go with the auction, I will get a title inspection done and I am planning to budget my bid so I'll have some unforeseen future expenses, but I assume they should be under 20k or so.

My understanding is that if the property get foreclosed by the 1st mortgage, the 2nd mortgage and HOA liens will be dismissed/wiped out (it is in Arizona). Please confirm it is correct.

I also can consider to ask the Trustee if they are willing to do a pre-foreclosure on it. But, as I gathered, I'll be responsible for all outstanding debts in such scenario.

My main concern that the property is listed as Occupied. I don't really want to all possible hostility from the current owner after the foreclosure. So, I thought pre-foreclosure might be a better route.

Any advised from experienced investors will be really appreciated.