All Forum Posts by: L Huang

Hi Ashish and Natalie - Thank you both very much for your responses and hope you had a Happy New Year!

I hope you don't mind a followup question as I am still getting some conflicting info.

You both wrote that I will not qualify for the full $500k in my situation.

However, I have seen some articles that I say that since the apartment was originally my Primary Residence for many years (in my case it was my primary residence for 7 years) before I converted it to a rental, that I would still be able to take the full $500k deducsion (as long as I make it my primary residence again for 2 our of 5 years).

For example, 1 article on the Journal of Accountacy web site (https://www.journalofaccountancy.com/issues/2008/dec/newtreatmentforsecondhomeproceeds.html) wrote: "The new rules to 121 contain two exceptions. First, homeowners can move out of their primary residence and convert it to nonqualified use property such as rental, investment or vacation property and still be eligible for the full exclusion, as long as the homeowner meets the other requirements of section 121 at the date of disposition."

Can you provide additional feedback on this?

Thanks again,
L Huang

Hi Everyone, Happy Holidays!

In this article about "Taxes when converting your rental to primary" - https://www.nolo.com/legal-encyclopedia/taxes-when-you-convert-your-rental-property-your-personal-residence.html, it mentions an Exception that I hadn't heard of before. I was familiar with the "2 out of 5 year" exemption but not this 2009 exception.

I hope that some of you can reconfirm that my belief is correct - that this Exception does not apply to my situation because if it did, then that would be a bad surprise.

From the article: 

"However, a special rule enacted in 2009 limits the $250,000/$500,000 exclusion for homeowners who initially use their home for purposes other than their principal residence, such as a rental or vacation home. The rule requires you to reduce pro rata the amount of profit you exclude from your income based on the number of years after 2008 you used the home as a rental, vacation home, or other “nonqualifying use.

Here is my situation:

I have a Coop in Manhattan that I bought in 2006 and initially lived in for many years as my primary residence but then rented out. I plan to move back in for 2 years as Primary Residence in 2023 and 2024 to cover the 2 out of 5 years. Here are the details:

2006-2013: My Primary Residence

2014-2022: Rented out 2 out of 3 years during this period (my coop bylaw said that every third year had to be vacant) 

2023-2024: I plan to move back in and be my primary residence for 2 years to cover 2 out of 5 year rule so I can take the $500k exemption.

Questions:

a) I do NOT think that I am subject to this 2009 exception rule as the home was initially my home/primary residence before I started to rent it out, and therefore can take the FULL $500k exemption in 2025 when I sell. I hope that you can either confirm this is accurate.

b) Also, for any year of vacancy due to my Coop by law where I need to leave it empty every third year would I just treat those as "regular" rental years but with no income but still take depreciation and all the tax deductions (eg. monthly maintenance, property tax)?

Thank you very much in advance and Happy Holidays!

L

Hi Everyone,

Just reviving this thread as it is very helpful and I hope to get some guidance from the experts about adding LLC as Additional Insured to condos and coops that we rent out.

1) I live in New York and have 2 condos and 1 co-op that are rental properties. Each of the 3 properties are covered under their own policy under my name personally. No mortgage on them.

2) My new attorney recently advised me to put each of the 3 properities into their own individual LLC which I will do - to limit liability so that any plaintiff can't get to my personal assets.

3) My new insurance agent today recommended that after the LLC is created, that I should add the LLC as "Additional Insured" to the existing Personal policies for that property and that it is not necessary to get new/separate "commercial/landlord" policies for the LLCs themselves.

QUESTION:

Can someone explain how Adding LLC as "Additional Insured" legally limits the plaintiff getting to my personal assets? I don't understand how this would work as my personal name (and I will be adding my wife's name to the policies also) is on the policy.

For example, let's say the Personal policy for Coop #1 is $400,000 where my wife and I are named insured and we have added XYZ LLC to be the additional insured.

My understanding is that if the renter sues us for $1,000,000 that they are capped at being awarded $400k (from the policy) and can't get to us personally for the remaining amount that they are seeking?

Is that correct? If so, what legally limits the amount.

Hope that makes sense.

Thanks in advance!

Best,

Lee