All Forum Posts by: Ed Jerum

Dan Veld: This would be a change to the tax law requiring Congress and signing by the President to go into law. There will be lots of negotiation on the final terms and if the Democrats don't win the Senate as well as House, there will almost certainly be no change to the law.

There is positive sentiment in the US to increase taxes on the wealthy and provide more public infrastructure and services. This proposal looks in line with that. 

Real Estate investors have very favorable tax laws. As the above poster pointed out it won't effect most (not me). I'm sure the ones it will impact will have a smart solution to keep making money investing in real estate. In these times, I'm regularly grateful that most of my retirement income comes from rentals - good tenants, good properties and great cash flow = a relatively stress free way to make money and own an asset that is likely to keep appreciating. 

You should be fine under the IRS proposed regulations of a Safe Harbor if Rental Services exceed 250 hours per year. Issue I have with this is that depending on how much maintenance my rentals needs I have varying amounts of Rental Services in a given year. Some years way over 250 and some years where I have little turnover perhaps less. The proposed regulations do still allow for claiming the deduction even if you don't meet the Safe Harbor minimum if you qualify under § 1.199A-1(b)(14). IRS Notice 2019-07

Of course it depends on the duplex and your goals. I prefer side by side duplexes that have their own entrances and yards. These have more the feeling of a single family home and are more desirable. Better yet a single family with a cottage. 

Rick, this is for a rental property already owned in my name and I want to transfer it to a living trust that I have. (actually for a friend that wants to do this)

FYI I have had no problem getting the insurance company to name the trust as an additional insured.

Thanks. That makes sense. 

I found this in Wikipedia:

"There are certain exceptions to enforceability of due-on-sale clauses. These are generally contained in Title 12, Code of Federal Regulations, Section 591. For example, borrowers may place their home in their own trust without triggering the due-on-sale clause. "A lender may not exercise its option pursuant to a due-on-sale clause upon a transfer into an inter vivos trust in which the borrower is and remains abeneficiary and which does not relate to a transfer of rights of occupancy in the property." (12 U.S.C. 1701j-3(d)(8)..[5].) Note that abeneficiary means possibly among multiple beneficiaries."

 The typical application of this statue would be when someone places their own home in trust, but the statue wording is not so limited. 

Since in my case the beneficiary of the trust the property is transferred to,is the the same as the borrower and since the property was bought as investment and continues as an investment rental there is nothing that relates"to a transfer of rights of occupancy in the property." So the due on sale clause is not triggered because of the statutory exclusion. 

  So really there seems to be no need to get a bank's permission in this situation and why would they even care since nothing has changed substantively. 

Does anyone have any experience with transferring a mortgaged rental property to a revocable living trust, where the trust is created by the current owner and is also the trustee.  Does the bank holding the mortgage have to be notified? Should the bank be notified to avoid problems? Does the bank have the right to cancel the loan on the basis that this is a sale? Thanks