All Forum Posts by: Gregory Wilson

You need to direct the many issues raised in this fact pattern to your attorney and advisors. Having said that, be advised that a contribution of assets to the capital of an LLC is not a taxable event unless the LLC assumes liabilities for which the members are no longer responsible for. It is a 721 contribution.

Camilla: I know nothing about Illinois tax appeals, but if it is anything like Ohio, it is the expert witness, the appraiser, that is who matters. As an attorney in Ohio tax appeals I could train a reasonably intelligent 6th grader to put on a good appeal. The law and procedure is so simple about half the people who appeal do it pro se. But, the quality of the appraiser/expert witness is what we have to focus on here.

Sam: It is textbook recommendation from HVAC to undersize the a/c units so they run a long time and therefore reduce humidity more. This may be good science, but not so good lifestyle wise. After dozens of replacement a/c units I suggest you oversize the unit and not worry about humidity unless you live in a new sealed up tight energy efficient house. The additional cost to take increase compressor size is incremental when compared to the satisfaction you will have when the 20 people that end up in your space n a hot Cincinnati day are not sweating. If the HVAC guy sized a 3 ton unit (36000 btu) make him go to 4 tons, etc.

Florida has interesting law on partition suits resulting from co ownership. First you have to understand partition suits. Look it up.

Here is the interesting part. AI narrative:

There's a significant disadvantage for the filing party in Florida partition suits related to buyout options. Here's what I found:

Under Florida's partition laws, particularly the Uniform Partition of Heirs Property Act (UPHPA), there's a statutory buyout procedure that favors the non-filing party. If any co-tenant requests partition by sale, the court will send notice to all parties that any co-tenant EXCEPT the one requesting partition by sale may buy all the interests of the co-tenants that requested the sale.

Specifically, under Florida Statute 64.207, "if a defendant in a partition action persists in resisting the sale of the property, the resisting co-owner may pursue a buyout option." This buyout option prevents the property from going to the open market and allows the co-owner who wants to keep the property to buy the remaining percentage belonging to the plaintiff.

This puts the filing party at a distinct disadvantage because:

1. The law specifically excludes the party that requested partition by sale from the buyout process. The statute states: "any cotenant, except a cotenant that requested partition by sale, may give notice to the court that it elects to buy all the interests of the cotenants that requested partition by sale."

2. The non-filing parties have up to 45 days after the court sends notice to elect to buy out the filing party's interest. The purchase price is determined by the value of the entire property multiplied by the filing party's fractional ownership.

3. The valuation is based on a court-ordered appraisal, which means the filing party can't demand a higher price than what the court determines is fair based on the appraisal.

This creates a situation where the filing party effectively gives the non-filing parties a right of first refusal to purchase their interest, potentially at a lower price than what might be obtained on the open market, and without any ability to participate in the buyout process themselves.

I see it as important to consider the amount of shelter that gets the best result. If you have 125k of income to shelter and cost segregation gets you a 100k deduction, that is too much because you are essentially losing the benefit of your personal standard or itemized deductions and exemptions down to the baseline and reducing the carry forward losses.

The renovations you described are really just repairs because they do not expand the use or productivity of the properties. They are just deductible repairs and if you paid them in 2024 you are better off to deduct them as opposed to capitalizing them.

Some tax preparers mistakenly think that an repair like a roof or a floor is capital item because it costs a lot. Not so.

Quote from @Ashish Acharya:

@Justin Summers Yes, your mother can still claim the mortgage interest deduction since she holds legal title and makes the payments, even though the 1098-INT is issued to the prior owner. Ideally, the prior owner should issue a nominee 1098 to your mother and include a statement with their return noting her as the interest payor. If that’s not possible, your mother should attach a brief statement to her return explaining that she holds title and made the payments, while the 1098 was issued under the seller’s name. This creates a paper trail to support the deduction.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Just for clarification Ashish, here is a great AI explanation:

Legal Title vs. Equitable Title in Real Estate

Legal Title

Legal title represents the formal ownership of real property as recognized by law and recorded in official documents. Key characteristics include:

• Formal recognition in public records (deeds, titles, registrations)
• Right to control the disposition of property through sale, transfer, or encumbrance
• Standing in courts of law to defend property rights
• Power to convey the property to others through legal instruments
• Name appears in property tax records and other official documents
• Ability to grant mortgages, easements, and other legal interests

Legal title holders possess the formal "paper ownership" that is enforceable through legal action in courts of law.

Equitable Title

Equitable title represents the beneficial interest or right to enjoy and use property, even if someone else holds legal title. Key characteristics include:

• Right to use, possess, and enjoy the property
• Entitlement to any income, profits, or benefits derived from the property
• Beneficial ownership interest even without formal legal documentation
• Right to compel transfer of legal title under appropriate circumstances
• Protected by courts of equity rather than courts of law
• Often based on principles of fairness and intended ownership

Equitable title holders possess the actual beneficial enjoyment of the property, even if they don't appear as owners in legal records.

Common Situations with Split Title

1. Land Contracts/Contracts for Deed: Buyer has equitable title while seller retains legal title until final payment
2. Trusts: Trustee holds legal title while beneficiaries hold equitable title
3. Real Estate Purchase Agreements: Between signing and closing, buyer has equitable interest while seller retains legal title
4. Nominee Ownership: Legal titleholder acts as nominee for equitable owner
5. Life Estates: Life tenant has equitable title to use during lifetime while remainderman has future legal interest
6. Foreclosure Redemption Periods: Borrower retains equitable title during redemption period

Legal Significance

The distinction between legal and equitable title has significant implications in property disputes, tax matters, bankruptcy proceedings, and estate planning. Courts may recognize and enforce equitable title claims even against legal titleholders when equitable principles such as unjust enrichment, constructive trusts, or specific performance apply.

In summary, legal title represents formal ownership recognized by law, while equitable title represents the beneficial interest to use and enjoy the property. Both forms of ownership carry significant rights that courts will protect in their respective jurisdictions.

Quote from @Justin Summers:

Quote from @Gregory Wilson:

The correct answer is that the title holder/borrower deducts the interest and reports the interest income that mom paid to him and she issues the title holder/borrower a 1098.

 Mother bought the house and the loan is in prior owner's name.. Mother pays mortgage payment to bank monthly.  The 1098 is sent from bank in prior owner's name. Are you saying prior owners should issue mother a 1098? 

Your mom is paying land contract interest and principal to the owner. The manner of payment is by her discharging the owner's debt by paying the amounts owed to the owner to his bank. So mom should get a 1098 from the owner for her interest payment deemed to be made to the owner. And, since the interest is being paid to (for the benefit of) an individual and not a bank she should send the owner a 1099INT.

Quote from @Alan Asriants:

Quote from @Sam McCormack:

Quote from @Alan Asriants:

Quote from @Sam McCormack:

Quote from @Alan Asriants:

Do you have duct work in the property? If so, just add a condensor/compressor to the existing hot air furnace for central air. 

 Yes, but mini splits are still significantly more cost effective (to my understanding)

 If you have ductwork then no. If you don't then yes. If you have ductwork thats one compressor and condensor unit. If mini split thats 1 of those per unit/room

I will get quotes on this stuff of course, but I only need 2 mini splits. Like I said, small units (1bd, like 550 sqft)

 I really don't think they are that much more cost effective, probably less tbh than adding central air to duct work system. Also keep in mind that if you have a small unit, adding a ductless system takes up headspace and might make the place feel a little more cramped. I think just adding CA to your existing system is cleaner. 

This is a complicated topic. The ductwork for an old heat only system is unlikely to be correct for a central A/C system.Heat rises a/c falls. Return air for a heat only system is seeking cold air.
Also, the savings comes for people like me who want the bedroom at 65F when it is 90F outside but don't want the whole house or even a zone at 65F.

The correct answer is that the title holder/borrower deducts the interest and reports the interest income that mom paid to him and she issues the title holder/borrower a 1098.

You need to separate units inside and outside for two different apartments. But if it is two rooms of the same apartment you can get a two head unit with one outside heat pump.