All Forum Posts by: Jason Watson

CostSegEZ.com

$500

Any property under $2m.

Quote from @Michael Plaks:

Depreciation does somewhat depend on the timing, however I would be strongly against making purchasing decisions based on taxes. You buy when you have a deal. It may not be here tomorrow, and taxes won't matter then. 

100%. Far too many clients chase tax incentives. Chase wealth! Sure, some wealth is created by saving taxes... but building wealth is priority #1. A good deal is a good deal.

Imagine if you tried applying time lines and readiness to dating? You'd be single for a long long time.

I'd make the Activity be a dropdown... control the narrative. The material participation column would be read-only and change depending on the dropdown. Next, I would add a comments column. Seems a little wide too... perhaps some tighter formatting.

Good idea!

If you are in the storage facility business, it is likely not passive. Rather, it will be considered earned income... and if you have losses especially the first year with a bunch of start up costs and depreciation... and if your money is at risk (let's assume Yes), then this business venture can offset (or add) to your W-2 income.

This is how short-term rental loophole works. The IRS says "Hey, if you operate this like a real business then you can deduct losses." Sure, there are rules and whatnot, but that's the gist.

So... if are involved with the business from a day to day perspective, and if you have a profit motive, then this is no different than selling used copiers or being a consultant.

Speak to a qualified tax pro to help understand the rules so you know how to position your facts.

Quote from @Account Closed:

Quote from @Brett Hundley:

The short term rental loophole is for rentals where the average stay period is 7 days or less. However in my city a permit is required to list on Airbnb for 30 consecutive days or less. If I want to use the short term rental loophole, do I qualify if I host a 30 day stay on Airbnb. Then, I quickly list and purchase 4 one day stays. This way my average becomes less than 7 days per stay.

At the end of the year I assume to use the short term rental loophole I need to provide Airbnb proof that I averaged 7 days or less.

 While the IRS is not going to check you for the airbnb permit, your city could shut down your operation if they catch wind of what you are doing. 

 Yeah, I have a rental in Palm Desert. The cities here in Coachella Valley must employ some high-tech IT peeps because they troll for bad actors, find them with AI and other tools, and fine them $5,000. This isn't Nike and Michael Jordan and paying the NBA per game fine for having too much color on your shoes... this is pretty serious stuff.

Unfortunate, for sure. And yes, we can have a discussion of how STRs ruin neighborhoods, and crime goes up 473%, and people are being displaced from affordable housing, and all that crud. But we all know where that gets us.

Sounds like a tax planning opportunity for you and your tax pro.

What some people are suggesting above is "equity stripping" where you keep your direct equity small in case of lawsuits or other troubles. I am not a big fan of this unless you can earn good money on the cash you pull out; and it makes things a bit illiquid.

Conversely... paying off a real estate loan feels good, but at the same time getting cash out of a house that is paid for is not necessarily hard but can be a pain.

At times I suggest that people run parallel for a bit... have your cash sitting somewhere earning 5-6% and have your loan charging you 5-6% (or less or more, I know, but...). See how that feels... the net is the same (provided you can deduct the interest against the interest income earned, I get it again, but...). Even if your mortgage is 8% and you earn 6%, the tax-effected 8% becomes a 6% (assuming you can deduct it, again, I get it, but...).

Once things feel good and you are settled, then you knock off that loan with your pile of cash. But this parallel system buys you time. Time adds clarity and keeps you off your therapist's couch.

I also suggest to anyone in real estate to constantly be pushing the line of credit envelope with your lender. I just renewed my personal line of credit on an office building we own, plus I will get another on a rental we have in a bit. Max lines = flexibility. Provided your cashflow can support the limits, have lines on everything you own... whether you use them or not doesn't matter. But you will sleep better.

Ah... I like that. We can't self-promote... but we could use a straw promoter. "I know a guy who know's a guy." Love it! Now I need a cool name like Denver for my straw promoter.

Kidding everyone... just having some Wednesday fun.

All good advice. You are stuck. Basically any distribution of assets to the shareholders is done at fair market value. #1 reason we don't put appreciating assets in S Corps. #2 reason is that rentals already bypass self-employment taxes (usually) which is the primary benefit of an S Corp (reduce SE tax plus PTET possibility).

There is zero harm leaving it in the S Corp just don't revoke your election.

100% agree.

We do advise rentals be put into partnerships for several reasons.