All Forum Posts by: Gregory Wilson

Quote from @Michael Plaks:

@Gregory Wilson  - partnership return compliance has become insane in the last several years. There are dozens of check boxes, some of them matter, and Balance Sheet and capital accounts are now required. The time of DIY partnership returns has passed.

Yea, I've see all those questions. That is IRS trying to narrow down the number of returns they need to mess with. And, several of the questions are opaque in what they relate to unless one is a tax professional or knows how to read tax code.

You are right about the first thing. The LLC is the best protection one can get. Of course, we all responsible for our own torts but only the LLC is responsible for the torts of its agents.

As for the second, there are only about 20 monetary numbers to be entered in Turbo Tax on a single unit rental property 1065 so it always seems to me that the $3500 would be better spent elsewhere. But, I was once a paid preparer and prepared or supervised the preparation of tens of thousands of tax returns and I saw some pretty stupid self prepared mistakes. So in the words of Clint Eastwood: "A man has to know his own limitations."

Note to readers: If you have to get your kid to show you how to buy the Turbo Tax software, download from Amazon, and register and update it - don't do it.

A few things there, Brendan.

First, an LLC with you as a member and your (wife, son, pal, etc.) partner as a 1% member will file a Form 1065 which is about one tenth as likely to be audited by the IRS as a Form 1040 with a Schedule E rental activity (which I presume you will attempt to show is an active business).

Second, you want an LLC because when your local Alabama handyman drives his girlfriend's uninsured truck into a van load of U of A medical school interns on I-22 when he goes to get some shingles for your roof, on your business, you don't lose everything you have or ever will have to an uninsured claim. Of course you could roll the dice and try to show that he is an "independent contractor" and respondeat superior does not apply. But, as Cousin Vinny reminds us, "we're in f******* Alabama."

Finally, get Turbo Tax business and also the 1040 version you need. The $200 you spend will help with your learning curve which you do not want to get from the CPA at $350/hr. When you have about 10 doors, get the CPA involved.

You prpobably don't care about Ohio, but their requirements might be instructive.

You can only file January 1 through March 31.

Recent sale of the assessed property is de facto value.

Expert is needed for anything else.

They can raise the value if you appeal.

Comparable sales only count if they were closed before the lien date which is one year prior to the tax bill date.

Speaking of IRS budget to audit returns, what that means is that IRS allocates a certain amount of manpower to do the audits. Let's say they budget the audit of 1000 Forms 1065.

My question is "when do they select those 1000 returns?"

I'd like to know because if they select them as they are entered into their database, right after filing, then there is another good reason to always extend and file on the last day. Because they will already have reached their budget for selection of audit candidates.

Any former IRS people out there who know?

These are all good points but mostly have nothing to do with how a 1065 Return gets selected for audit.

First of all, IRS audits somewhere between .06% and .2% of filed Form 1065's. That is between 6 and 20 returns out of every 10,000 returns.

That 6 or 20 has to include some pretty likely candidates. Tax shelter schemes, partnerships with foreign partners and accounts, partnerships with hundreds of members, returns with blatant mistakes, entities in questionable businesses, like gambling, drugs, online video sales, escort services. Businesses with tons of cash: bars, check cashing, payday lenders, casinos, car washes, vending etc.

Then the return's contents are analyzed using the Discriminate Function standards. Tons of returns set this system off: errors, no income lots of expenses, disproportionate expenses, etc.

When all that is done, IRS has a budget for how many returns they will put in the audit queue. No one has time or inclination to look at 90% of the things that we would consider interesting to look at from an audit standpoint.

So, chill.

Quote from @Evan Miller:

I should mention that I am looking as SMF investing, 2-4 units. Thanks. 

The drop and Swap is about all we use here due to the confiscatory tax rates based on sale price. But it is very much applicable to single family rental and residential units simply by getting bridge financing and a post transfer cash out refi.

Your first mortgage lender is always the best choice.

Quote from @Gregory Wilson:

Quote from @Jacklyn Robins:

@Timur Salikov In NYC, $1,500 gets you a 400 sq ft apartment with a subway station under your feet and crackheads outside your window. Yet everyone still wants to live here.

Open to connect? I'd love to hear your take on the block.

The problem in Cincinnati is that it is a bifurcated market. There is a large population of low income persons who are poorly integrated and somewhat centralized. They are not very mobile and this neighborhood looks about the same, demographically, as it did at the time of the Race Riot of 1967 where buildings all around your property were burned to the ground. A few public projects have cleaned this up but the area has never prospered since. It is a shame since it was mostly successful black owned businesses that were burned down. My dad shopped there almost every Sat. and as a little boy I tagged along. But, there was also a lot of violence in 1967 which has left a bad stigma on the neighborhood. You'd think 60 years would have cleansed all that but it hasn't.
You might target social service and local agencies since this property was in the past a half way house or similar and was only converted to market housing to make the sale to you. OTRCH operates a couple of what I call "wet rehab" centers meaning congregate housing for persons otherwise homeless and there are several other agencies like "First Step House" etc. that might be interested in a presence in this block.

Or you could cut your losses and put it back on the market under the "greater fool theory."

Maybe I was mistaken about its prior use. I thought I saw it listed as a half way house or mental health housing. Sorry if I made a mistake.

Quote from @Jacklyn Robins:

@Timur Salikov In NYC, $1,500 gets you a 400 sq ft apartment with a subway station under your feet and crackheads outside your window. Yet everyone still wants to live here.

Open to connect? I'd love to hear your take on the block.

The problem in Cincinnati is that it is a bifurcated market. There is a large population of low income persons who are poorly integrated and somewhat centralized. They are not very mobile and this neighborhood looks about the same, demographically, as it did at the time of the Race Riot of 1967 where buildings all around your property were burned to the ground. A few public projects have cleaned this up but the area has never prospered since. It is a shame since it was mostly successful black owned businesses that were burned down. My dad shopped there almost every Sat. and as a little boy I tagged along. But, there was also a lot of violence in 1967 which has left a bad stigma on the neighborhood. You'd think 60 years would have cleansed all that but it hasn't.
You might target social service and local agencies since this property was in the past a half way house or similar and was only converted to market housing to make the sale to you. OTRCH operates a couple of what I call "wet rehab" centers meaning congregate housing for persons otherwise homeless and there are several other agencies like "First Step House" etc. that might be interested in a presence in this block.

Or you could cut your losses and put it back on the market under the "greater fool theory."