All Forum Posts by: Jim P.

I own a house in Portland that happens to be a commercial zone (CM2).  I've just been renting it out to long term tenants, but I'm wondering if I can legally do short term rentals (AirBnb) even if it isn't owner-occupied since it's zoned for commercial use?

I would be curious if anyone has gone the route of monitoring the power from the panels and charging tenants for their use at the same rate as the power company.  I think that's a better idea than raising the rent.

@Michael Plaks thanks for that excellent explanation.  Yeah, I think that all makes a lot of sense.

So let's see if I'm doing this correctly.  Let's say I have a paid-off investment property and I did a cash-out refi to take out $100k last year.  I used that money for investing in stocks and things so last year I put the interest from that refi on my Schedule A Itemized Deductions line 14 "investment interest".

If this year I sell the stocks and use that same $100k to buy an $80k house.  So then 80% of that refi interest is now deductible on that house's Schedule E as mortgage interest.  (And if I use the other $20k left to invest in stocks again, that 20% of the refi interest can also be deducted on my Schedule A line 14.) 

Is that right?

Here's something I don't know the answer to... if I buy a foreclosure house with cash and immediately get a mortgage for it so I can get my cash back, I guess that would basically be a cash-out refinance.  Would that mortgage interest be deductible on that house's Schedule E as mortgage interest?  I think I saw something about it being considered interest for the property if you do the financing within 90 days after the sale or something like that.

Yeah, I'm going to look for a CPA soon, but it's probably hard to talk to one this time of year I'm guessing. I'll probably wait until later in the month to try to contact one.

I'm considering buying an investment property with cash (such as foreclosures that are only available to cash buyers).  I have the cash for it, but I would like to later get a mortgage on it so I don't have so much cash tied up in it.  But if I do that, would the mortgage interest be deductible from my rental income?

Here's another twist. The cash I have right now came from doing a cash-out refi of another completely paid off rental property I have. If I take that cash and buy a property with it, is the interest on that cash-out refi deductible from my rental income for either property? So far these are all just in my own name, not with an LLC by the way.

Is there a source (maybe in the IRS instructions) that mentions that exception?  I haven't seen anything like that in what I've read.  And you're sure this applies even if the business isn't a partnership or joint venture shared by the spouses?  

Everything I've read from the IRS and other sources says you have to pay your spouse as an employee for them to be able to participate in the 401(k), not just as a 1099 contract worker.

I believe that's incorrect. Only employees can participate in a 401(k) plan, not 1099-MISC contract workers (even if they're your spouse). 1099 contract workers can contribute to other types of retirement plans, such as a SEP IRA, but not a 401(k). My understanding of it is that your spouse has to either be a paid employee, or a co-owner of the business.

I just wanted to mention that I still haven't found any definite answers to this.  I did hear from someone else who is also in the same situation.  I've contacted several local CPAs and tax attorneys and none have any clue what to do.  

If anyone knows of a really good CPA with lots of Solo 401k experience who might be able to figure this out, or if anyone has any contacts at the IRS, etc., please let me know.

I believe that's incorrect.  The closest thing I've found to an answer is this:

https://www.law.cornell.edu/cfr/text/26/1.401%28a%29%2831%29-1

So, it seems the answer is that the invalid rollover amount has to be distributed to me. The question now seems to be how exactly to do that correctly. What codes and amounts do I use on the 1099-R? Do I pay taxes on the amount? Can the funds be deposited back into an IRA?

I'm not sure I understand this part. I know I should have done that originally (rollover only the pretax funds, and put the non-deductible part in a Roth IRA). But I don't think I can still do that now that all the funds are in the 401k.

Will the IRS allow me to just forfeit my basis in my 401k and if I'm willing to accept getting taxed again on the funds from that one contribution when I do an in-plan rollover of the 401k to a Roth 401k account?