All Forum Posts by: Michael Plaks

Listen, folks. We can forever argue about California weather and California politics, with no chance of agreeing.

However there is one thing about California which is not debatable and legitimately makes it the most despised state. It hosts the darn Golden State Warriors. That does it.

Chris, I appreciate you entering the discussion, and it would be helpful for us if you explicitly mentioned that you work for Anderson as their legal counsel.

I have three questions about the link you provided, and I am NOT an attorney, so these are layman's questions.

1. As all private rulings, it contains a disclaimer that we probably should not ignore:
"Please be advised that the tax consequences expressed in this Chief Counsel Ruling are
applicable only to the named taxpayer and are based upon and limited to the facts you have
submitted."

In other words, this is not a legal precedent, as far as I understand, and the FTB is not bound by it - am I mistaken?

2. The ruling refers to a Massachusetts Business Trust, not a Wyoming Statutory Trust. Does it matter?

3. Most importantly, it addresses a corporation defined under CA RTC Section 23153. However, what we are discussing here is an LLC, and it is controlled by a different CA RTC section, Section 17941. And while 17941 does refer to 23153 in respect to the amount of the fee, it does not appear to defer to 23153 as far as the imposition of this tax.

In other words, per my non-attorney reading of your linked document, it does not shield LLCs from the $800 extortion. 

Please clarify what am I missing here. Thank you.

@Andreas W.

We are brothers, and we inherited half of a $1 MM property, so you own $500k, and I own $500k. And of the second $2 MM property, we each own $1 MM. We both own $1.5 MM apiece, and there's peace in the family.

Now you convinced me to exchange shares, and now you own the $2 MM property, and I own the $1 MM property. And, like you said, no money exchanged hands. Huh? Wait, what just happened?!? I was cool with it because we're brothers, but my wife ain't cool with it at all. Thanksgiving is cancelled.

To answer my own earlier question of what just happened - a gift happened! I just made a huge gift to you, my beloved but cunning brother!

Gifts of this magnitude are reportable to the IRS, although it does not trigger any tax consequences on either of us. At least not while we are alive.

Here is my post about finding a tax professional:
https://www.biggerpockets.com/forums/51/topics/1222774-expla...

and it mentions why I think looking locally should not be a priority

California is a wonderful state...

...to keep away from  ;)

Useful life does not have anything to do with depreciation. I mean, the concept was that it should, but in reality it does not.

Floating vinyl planks are a 5-yr personal property and eligible for Section 179. Also eligible for bonus depreciation but Section 179 allows 100% while bonus depreciation does not. Why CPAs gave you different answers is a mystery to me.

I have heard this claim before, but California-based attorneys who work with my clients do not agree with it. Did Clint offer any substantiation for his claim, like a code citation or a court case?

Your question does not have a simple answer.

Here is when it would have been relatively simple. If you were consistently buying and reselling already subdivided lots, then taxes on your profit would have been spread over those 5 years. It's still not "on income physically received" because the formula is more complex than that, but it's stretched over 5 years.

Your situation is complicated by two factors:
a. we do not know if this is a one-time deal or your regular business model
b. the fact that you are subdividing a larger lot can throw a wrench into your preferred tax treatment

So really it requires a one-on-one discussion with a real estate tax expert.

Here is your start:
https://www.biggerpockets.com/forums/51/topics/1121063-expla...

Thanks. This is a public forum. The whole point is to share.