All Forum Posts by: Gregory Wilson

I invested in a syndication and on the Schedule K-1 Box 10 " section 1231" I have a loss. I am confused as to how to report this. Below are two thoughts I have, not sure which is correct. Would appreicate anyone can provide some assistance.

1. The instruction stated it should go on form 4797, and the loss is subject to unallowable loss limit. Since I didn't participant, it would be passive loss, so it makes sense to me. However I also have a loss on box 2, do I report them both combined? or separately on form 8582? I can't seem to find any answer on this.

2. I wen through entering form 4797, it didn't really refering it to Form 8582 and at the end of the form it's asking to enter it on Schedule 1. I feel like it's treating it as an active loss.

Hope I make sense here. First time doing this.

Your tax software should have a worksheet on which to enter K-1 numbers, including this loss. Look for something like a "K-1 worksheet." The software then takes the numbers and puts them where they belong.

You tax prep software will ask you what boxes have entries in them and then dialogue with you as to where they go in the software. Don't even think about preparing a tax return without using Turbo Tax or equivalent.

0 Votes

I usually advise new owners to DYI this with Turbo Tax until they get to about 10 doors, but NYC is a dumpster fire with the restrictions and regulations they impose. A well experienced real estate accountant will be a big help in your trip through the minefield.

2 Votes

New York City, New York

Quote from @Chris Seveney:

Quote from @Michael Plaks:

Quote from @Stephen Nelson:

Hopefully, we human professionals are right like 95% of the time in our areas of domain expertise. So, a 5% error rate?

5% human error rate is only possible for unmarried pros ;)

Feel like this is the store I am walking into reading this post

Where is that store. Asking for a friend.

2 Votes

I use it for a variety of things. Now I am subscribed to Claude Pro. $20/mo. You would not believe the improvement over CharGPT free version. Its exponential.

I uploaded 20 watercolors my 7 year old grandchild did and asked Claude to link them together in a childrens story. 500 words.

I had to write a stern letter to an Order of Nuns and wanted all of the protocol to be respectful and perfect.

My client asked for a memo on the additional filing and compliance requirements he would have when he got to more than 100 employees.

1 Vote

No, its a whole new ball game with AI. Google gives you everything. If its a really narrow search, ok then. But if you are asking a question you want a targeted narrative response. Let's give an example. Let's ask: i'm donating a house I've owned for 10 years to a lcal 501(c)(3). Am I going to get a tax deduction and how much?

Here is Chatgpt:

Yes, you can generally get a tax deduction for donating real property, like a house, to a 501(c)(3) organization, but there are a few important details to consider:

Fair Market Value (FMV): For tax purposes, the deduction is based on the fair market value of the property at the time of donation. You may need an independent appraisal if the value of the property exceeds $5,000, as the IRS generally requires this for non-cash donations of significant value.
Capital Gains Considerations: If you've owned the property for more than a year (which you have, having owned it for 10 years), the house is considered a long-term capital asset. When donated to a qualifying charity, you generally can deduct the full fair market value without having to pay capital gains taxes, which is a big benefit compared to selling it.
Itemized Deductions: To claim the deduction, you must itemize your deductions on your tax return (rather than taking the standard deduction). If you don’t itemize, you won't be able to claim the deduction.
Limits on Deductions: The amount you can deduct may be subject to limits based on your adjusted gross income (AGI). For donations of property to a public charity, the deduction is typically limited to 30% of your AGI. If your donation exceeds this limit, you may be able to carry forward the deduction to future years (up to five years).
Forms & Documentation: Be sure to file the appropriate IRS forms (such as Form 8283) for non-cash charitable contributions. You'll need to keep good records, including the appraisal if necessary, and acknowledgment from the charity.

In terms of how much you’ll actually get back in terms of tax benefits, it depends on your specific tax situation (your income, other deductions, and tax bracket). For example, if you are in a 24% tax bracket and the house is valued at $200,000, your potential tax savings might be around $48,000 (24% of $200,000), but that's a rough estimate and assumes you're itemizing.

It's always a good idea to consult a tax professional to ensure you're maximizing your deduction and following all the necessary procedures for your donation.

0 Votes

If you put the paint brush on it, you paint the entire plane. Touching up is ok for your own childrens'' playroom.

And, with the introduction of 3M blue tape, painting can now be well done by a person with no skills at all. It is the lowest common denominator of the construction trades. What you can't find are drywall finishers which is actually a skill.

1 Vote

All of the usual suspects do it.

Incorp

Legal Zoom

Northwest

Rocket legal

etc.

0 Votes

Cincinnati, Ohio

Natalie, I don't usually want to debate what are usually opinions, but this needs some correction.

First, as stated above, tax audit issues are about 7th on the list of reasons to have every rental property in an LLC. Whether it is a partnership or a disregarded entity is a second tier consideration. I can do the parade of horribles for a personally owned rental property but suffice it to say that it is a long and robust parade and the horribles are horrible.

Second, all of the same numbers used for a schedule E Form 1040 filing as for a Form 1065. And, Turbo tax Business software is $163. I did my own 1065 in an hour and 45 minutes. So $4500 is a choice not an immutable fact.

As far as home office no longer being an IRS "red flag" I guaranty that if you put a home office deduction on a personal return on Turbo Tax it will move their audit risk needle. So at least they think it does. I have been trying toe get a list of the IRS discriminate function indicators to no avail so I'd like to know how you can say that home office no longer concerns IRS.

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Quote from @Natalie Kolodij:

Last I checked Chat GTP was making up tax court cases.

Like they weren't mixed up, or it referred to the wrong case....it literally made up names for court cases related to a specific topic. They didn't exist.

So I would just use caution in that area.

I can attest to that. Court cases and even Code sections. Completely made up. Non existent.

1 Vote

Quote from @Sean Graham:

Quote from @Bruce D. Kowal:

This is almost peak Tax Season. Many BP’s are reaching out to tax professionals here. Frankly, most are seeking free tax advice. Much like a forum on Divorce. The intensity and same desire to avoid paying a licensed professional for his opinion. That’s Fine. Human nature is immutable.

So, here is a useful tool which BP’s can use to answer those questions: AI. Either GPT or Claude. Take you pick.

Most questions revolve around Material Participation, and tax filing compliance. By “compliance” I mean what forms, what States/ Cities?

All AI queries should be in the following format. In brackets I will explain why. Ready?

Let’s start with Compliance

Prompt:

[1] You are an expert in the federal and state taxation of landlords owning rental property [you need to tell the AI what is expected].

[2] I am a CPA, with expertise in taxation of real estate [unless you want a watered-down response, tell the AI that you want a granular response]

[3] Use IRAC format [This is used by attorneys. It means that the response will follow the format of Issue, Rule, Analysis and Conclusion]

[4] Use markdown tables [the output will be in tabular form. You will shout for joy!]

[5] Cite Code, Regs and USTC decisions. [this will give you the absolute legal basis for the answers]

[6] Verify. Do not fabricate. [AI programs, actually called Large Language Modules, can give you false responses. These LLM’s are like puppies that want to please you. They will make stuff up. Be careful!!!]

[7] Facts: I am a resident of Pennsylvania. I am a landlord with 1 rental property in Philadelphia, 1 in Washington DC, 1 in Florida, 1 in Ohio and 2 in California

[Discuss how the properties are titled. In an LLC, individually, layers of LLC's - a WY LLC owning a PA LLC etc. And discuss whether those LLC's have more than one Member. Be specific. The LLC, amazingly, will remember who owns what. ]

What are my Federal, State and Local filing requirements? Income tax and local taxes. What are the annual filing and permitting requirements? Resident and Non-Resident, and LLC. What are the penalties for failure to file?

Comment: there you go! At the end the response, the LLM will pose very useful and intelligent follow-up questions. Be sure to request that all those be answered. They will help clarify the issues. Now when you approach your tax professional you will know the scope of work that is required. Be sure to print out the responses and annotate them as you see fit.

And now for the What-if Questions?

[After repeating exactly items #1 through 6 above, give the facts. Here is an example

Facts: I am a W2 employee at a Company which does [describe. This is important] and my Wife is [employee, contractor, Home Maker, . . ] We are landlords and own properties [see example from above]. My Wife and I manage the properties, we share in this approx [hours weekly]. Our adjusted gross income is [above or below] $150,000. The properties on an overall basis have tax losses.

Under what conditions can these passive losses be considered to be non-passive? Based upon this fact pattern, do we qualify for Real Estate Professional status? IRC §469(c)(7). How should we keep records to document that status? Please provide Checklists.

Comments: select all the follow up questions.

There!!! Now, there is no longer a need to seek free advice from busy tax professionals. Buy your copy of TurboTax with the modules for the States, and you are set to do this yourselves, without having to pay us. Just keep asking the LLM for help. Those pesky State Non-Resident tax returns? A piece of cake with TurboTax. California LLC returns? CA-568. Five minutes. DC Non-Resident? Just one click.

It will even calculate if you feed it numbers. For example, tell it that you have a rental loss $X from a property, and that the Unallowed losses are $Y, and the Qualified Business Income Loss carryforward is $Z. You could theoretically do all the calculations on TurboTax and double check with the LLM. Try it. It won't take too much time.

Be sure to save this post, and print it out.

Uhhhh, one last thought! Remember Mickey Mouse in the Sorcerer's Apprentice?

This is true but the answers are sometimes wrong still

This is pretty interesting. I am using these all the time. Almost every research project starts out with an AI inquiry. And, a lot of the time the AI result is dead wrong. Even made up code and reg sections that don't exist. And sometimes right on target.
What always works is for the AI engine to re write the memos I write. And, to summarize a large area of information.
Recently I had AI write a memo on the compliance and regulatory issues that companies with more than 25 and also more than 100 employees faced compared with under 25 and under 100. It was beautiful. I had to check every reference but I think it save the client 50 to 100 hours of associate time.
Just saying.

1 Vote

All Forum Posts by: Gregory Wilson

Gregory Wilson has started 2 posts and replied 182 times.

Post: Section 1231 loss on Schedule K-1

Post: Tax Preparation for Real Estate Investors – Need Advice!

Post: How to bypass your CPA and get free and accurate tax advice using AI [SAVE this post

Post: How to bypass your CPA and get free and accurate tax advice using AI [SAVE this post

Post: How to bypass your CPA and get free and accurate tax advice using AI [SAVE this post

Post: Nail/Screw Holes in Walls

Post: Seeking a statutory/registered agent for LLC in OH

Post: Maximizing Tax Benefits: The Hidden Home Office Deduction for Landlords 🏠💼

Post: How to bypass your CPA and get free and accurate tax advice using AI [SAVE this post

Post: How to bypass your CPA and get free and accurate tax advice using AI [SAVE this post