All Forum Posts by: Buddy Holmes

Thanks @Dmitriy Fomichenko, quite a quick reply!

That sound correct to me, but since one answer was yes I wanted to check.

In doing this I could agree to a high interest rate and points to essentially fund my IRA through the mortgage.

Cheers,

Buddy

I am buying a SFR as an investment property. It is out of state and will not be used in any way personally.

I have a Self Directed IRA and would like to start trying out Mortgage notes.

Is it OK or prohibited to do a first and only mortgage on this property with my Self directed IRA?

So far one Trust Company says no and one says yes.  Help! experience?

Cheers,

Buddy

Thanks @Dave Foster,

I have closed with this wholesaler and escrow company previously (not an 1031 exchange) and I think they did just place the wholesalers fee on the closing docs.  I will check to be sure.

We would like the closing escrow to hold back some funds from the agreed purchase price for a contractor to add a HVAC unit after closing as well. As a QI would this be a problem.  It would come from the Wholesaler fee and be included in the closing docs.   Would the QI be required to hold back these funds until completion or would he trust the escrow company to handle it properly?

Cheers,

Buddy

I have a wholesale deal that I would like to close with 1031 exchange funds.

In the past the QI has wanted the closing docs and I am sue this one will be the same.

Does the wholesalers fees or funds give any problem to the QI approval?

Cheers,

Buddy 

@Michael Plaks, et al

I am planning to do a QCD for 2018. In reading some of the referenced articles on QCD's I ran across one area that is unclear. I am clear on the MRD from an IRA being legal, but what about a MRD from my 401K? Other retirement type accounts (other than Roth IRA) seemed to not be approved for the QCD. I can of course move my 401K to an IRA and solve the issue but not in time for 2018, since as mentioned in the article any withdrawal form the 401K must be preceeded by the 2018 MRD.

Help?

Cheers,

Buddy 

@Roy Jenkins

@Mark Mattison and I put together a group who met last 19 June at Steel City Pizza on Dorchester Rd. I could not attend that evening unfortunately, but the turn out was good and over a dozen REI and want-to-be REI's attended. Our last meeting in November was at Community Pizza in Tangier Outlet on the third Monday. They have a more private upper room which we didn't reserve last time but should for a January meet-up. 3rd Monday is the 15th of January so we will see how it goes with local interest.

Cheers, Buddy

1031 Exchange into a Delaware Statutory Trust (DST) and reporting such on Tax Return

I am trying to visualize just how DST Tax Reporting is done on a 1031 exchange into a DST., and how the Property Basis and depreciation is handled in the exchange process.

As a set up assume:

1) The exchanged property was 100% Long Term Cap Gain and 0% depreciation and o% Loan

2) The DST has a Loan to Value (LTV) of 50% and a 4% Interest only non-recourse loan for 10 years

3) The DST purchase price in $200K of a $20M Apartment Development property or 0.01% share

4) The DST property has been given an 80/20 Improved/Land valuation.

5) The DST projects a 5% annual return

Am I correct in assuming I report on Schedule E::

1) Interest on the 0.01% of the $10M loan, or ~$4K?

2) Is my starting Basis would be 0.01% of $16M or $160K?

3) Or since a proportioned ~$199K of the exchanged purchase is sheltered LTCG, although there was no prior depreciation, is the new property BASIS impacted?

4) Or is my depreciation of one year of the 27.5 year life of that $160K or ~$5.8K?

5) Other Expenses as provided by the DST?

6) An income of $10k?

7) So a net income of less than $0.2K or nearly or totally tax sheltered $10K income?

Now assume at the end of 5 years, the DST sells out for a net $25M

1) My Exchange sales price is $250K.

2) My Exchange Mortgage is still $100K

3) My Basis is down to ~$130K

As I do another 1031 into another DST that is identical to that described above:

1) I invest all $250K for a 0.125% share. I meet the reinvest all or more 1031 criteria.

2) My mortgage is 0.0125% or $125K. I meet the exchange to more mortgage 1031 criteria.

3) My Cash out is $250K - $200K = $50K. All cash is reinvested meeting 1031 criteria

4) My Profit and would be Long Term Capital Gain is $250K-$130K = $80K

5) My property in new DST is 0.125% of 80% of $20M or $200K

6) Is my new Basis would be $200K- $80K = $120K

So my new investment’s Schedule E return reports:

1) Income of $12.5K

2) Interest of $5.0K

3) Depreciation of ~$4.36K

4) Net income before other expenses of $3.14K

And depreciation continues to be less and less an offset...

And then what???

Cheers,

Buddy

@Mark Lucido

Somewhat a small group perhaps, but if you are 70.5 Years and under the Minimum Required Distribution (MRD) clause...

You can transfer your MRD directly to the Charity so in addition to NOT having the MRD add to your income, it would not be a concern in your new standard deduction and SALT issues.

Cheers,

Buddy

Thanks @Ashish Acharya!

And the 100% bonus for this expense in 2017 is taken on the 2017 Return, correct?

@Michael Plaks,

I just wrote another blog about this but see that it seems to fit here.

I am installing a rear fence at a rental property which is on a pond.  It is currently rented to an adult couple but we want to be able to rent to a family as well and feel we should put up some barrier to the water.

The question is sine the expense is after 27 Sept 2017 the new tax law per @Amanda Han's

recent post this seems like it could be 100% expense in 2017?

Or must it be depreciated if over the $2500 cost (I read this was an IRS allowance somewhere)?

Or must it be depreciated no matter what the cost?

Confused and need help.

Cheers,

Buddy