All Forum Posts by: Shimi T.

I had to google "FAFSA"...Well, My Master's in Engineering Science was done here in the States but I had to pay every penny of it :)

Thank you for your indication. It is now confirmed that hiring your kid for help has tons of benefits, but may also have a (costly) disadvantage...quite Interesting. With the prices of college tuitions, I may let him play video games now and hire an outside helper instead... ;)

Again, thank you for the knowledge and wisdom. 

@Ashish Acharya, @Michael Plaks

Thank you greatly for spending the time and clearing the confusion on this issue with your thorough responses. Much appreciated. I'll go through the details and the article provided. 

Michael, per your reply about a potential disadvantage of filing W-2 for the kid, it may be the potential impact on receiving college scholarship money in the future due to its past earnings. This disadvantage was mentioned in one of the threads. I'll be happy to have any input on this concern. 

Throughout the internet, there are too many contradicting responses by CPAs on teen kid's pay for assistance in parents' rental business work. Brandon Hall Vs. Mark J Kohler to name a few. One says that W-2 is needed even if it is under the Standard Deduction (https://youtu.be/1F6proZomHU), and the other says the opposite, that W-2 is not needed (https://youtu.be/ZVyqDK4pkc8). Unfortunately, my CPA is also confused...

As we have several rental properties (along with our day jobs) any help is appreciated. Please take into account that all is legit, Work Agreement with our 15 yrs old son is prepared, work hours are justified and logged, hourly rates are fair, labor regulations are met, etc. 

Is there a definitive and bulletproof answer on it? If so, what is the 'mechanics' of it using Schedule E (w/o LLCs)?

Thank you for trying to clear this confusing subject. 



  

Hi Tax Pro's, I'm a 'buy and hold' investor & developer with several rental properties, and I'm also considered RE Professional for tax purposes. 

I purchased a 4BR/2Bth SFR rental property in CA in March 2020. This SFR unit (main house) was 'placed in service' and rented in April 2020. With the relaxation of ADU ("Granny Flat") regulations in CA, I decided to convert the existing separate garage (no rented) to an ADU while the main house is rented. The design/permit were done in 2020, and the new construction (framing, drywall, kitchen, etc.) started in the 4th Qtr. of 2020, and to be complete in 1st Qtr. of 2021. The ADU to be rented in 2021. 

The ADU construction costs are segregated (Cost Segregation) to 5,15 and 27.5 yrs life. There are classified 5&15 yrs costs that fall under 100% bonus Depreciation in both 2020 and 2021. Based on the IRS, 100% bonus depreciation is granted for the 1st year that a property is 'placed in service'. 

So, what will be considered the 1st year for the ADU? Does the IRS sees the ADU as a separate unit or part of the main house/main property? Is the "1st year" considered 2020 when the entire property (including the existing garage) was purchased and 'Placed in Service', OR 2021 when the conversion of the garage to ADU is complete and rented? 

Sorry for the long description. Your response would be highly appreciated.   

Hi Christopher, Thank you for your response. 

To your question, for the Safe Harbor for Small Taxpayers (SHST), the property's Unadjusted Basis (i.e. excluding land, 100% bonus depreciation deduction, etc.) is probably around ~$300K. So, 2% is $6K, which is not enough to cover that $10K cost. 

As mentioned, the existing heating system was very old, broken down, inoperable, not up to code and probably unsafe. I could not fix it, but only replace it with a modern and up-to-code heater. Wouldn't that be considered a 'repair'? 

Hello BP members, I'm a 'Buy and Hold' RE investor with several rental properties in Las Vegas and Southern California. 

In 2020, I bought my last SFR rental property in SoCal. As part of repairing the place for tenants, I replaced a broken-down/inoperable heating system from the 40s. Only necessary replacement work was performed like the heater replacement while the existing ducts (and such) were only cleaned and restored. The system became OPERATIONAL and BROUGHT UP TO CODE per the CA regulations. Total cost was around $10K.

It should be emphasized that the property was placed in service (e.g. published, tenant search, showings, applications reviews, etc.) before doing the repairs. Also, the heating system was not necessary for renting the place during the warm Southern CA spring. 

Here is my question: Is this system replacement can be claimed as a repair, or it falls under a home improvement (depreciation)?  

I would appreciate your input!  Thank you in advance.