All Forum Posts by: Christopher Smith

You first might want to check to see if he is actually correct. 

Maybe personal use property converted to a business use takes a tax basis equal to the lower of original cost or FMV at conversion?

How old is your mother and how much growth do you see for the business? 

So your Uncle died without a will and the property has passed by the laws of intestacy? What does that law in your state say about who gets ownership? Is that what you mean by saying your names are on the letter of administration. A letter of administration is a court directed action that names an administrator when no executor exists because there was no will. Additionally, if the property passes through the taxable estate its tax basis adjusts to the decedents date of death fair market value so typically there is little if any taxable gain assuming it is disposed of shortly after the death of the decedent. 

So you and your uncle inherit the property, and he immediately conveys his half to you so you can then turn around and contribute the entire property to your LLC?

Just making sure the facts are clear.

Yes that is correct 

You can begin to depreciate it as soon as you put it into service. If it was rentable in December, and you were seeking a tenant to fill it then I would set it up and depreciate it starting in December 2020 (even if you couldn't find a tenant until after the new year).

1) No there is no depreciation "restart" as there is no new investment just additional borrowing against presumably fully depreciated property.

2) If you do sell you will need to recognize the depreciation recapture, if you refinance you will not have any immediate depreciation recapture. The depreciation recapture will be preserved for potential future recognition in the event you do sell the property.

Whether it is in or out of an entity has absolutely no bearing on it's fundamental tax treatment. It's the intent and purpose to which it is used that determines how it is treated for tax purposes.

As noted flips (which are considered inventory) are not eligible 1031 property, and holding that property within or without a corporate shell does nothing to alter that status.

Is this a flip property? Flip properties would typically not be eligible under 1031 (inventory is not a qualifying like kind exchange asset). If its an eligible property you might consider a Delaware Statutory Trust arrangement if you are about to run out of time.

I'd be very careful attempting to offset gains with contrived tax deductions or highly engineered tax loss transactions. They have a tendency to stand out like a sore thumb which means they will be challenged and tax, interest and penalties can be huge if they are not determined to be lawful.

I've seen many cases where folks have sold a business and as a result have a huge one time gain and thus shopped the National law and accounting firms for tax strategies to find an offset only to be utterly destroyed on audit.

You might research the BOSS, SON of BOSS tax, etc., tax avoidance transactions where people with gains in the hundreds of millions range fabricated offsetting loses and got absolutely crushed (and this was with supporting tax opinions in hand and top flight tax people defending them at great expense).