All Forum Posts by: Michael Plaks

Your question is similar to "does anyone have a blueprint of a house"?

Please be specific about what you do in your business. 

Also, unless you have some accounting background, I recommend against DIY-ing QuickBooks, including a custom chart of accounts.

@Jon Hollingsworth

If it makes you feel any better, you both are wrong. :)

She is wrong about the deemed sale. You do not owe anything right now, not until you sell.

You are, however, wrong in your expectations of what happens when you sell. When you sell you will still owe depreciation recapture, it never goes away unless you die (not recommended). Worse, you will owe part of the capital gain tax on the property appreciation between the original purchase and the eventual sale. 

The 2-year rule works great when you live there first and then move out and rent it before selling. But when you move back, the rule is modified and, instead of a full exclusion you only get a partial one. In other words, living there for 2 years will reduce your taxes but not erase them. To erase them completely, you will need more complex solutions.

@Kenneth Cook

There's no harm in a remote connection. In fact, during these items everything is remote anyway. Technology progressed beyond faxing receipts. 

If you're looking for a good accountant from your state, reach out to @Nicholas Aiola and @Basit Siddiqi who responded above.

@Eric Gabriel

If price is your only complaint, you may not be able to get a better price from the real estate specialized accountants on this forum, about 20 of us. Getting a cheap accountant who is not a real estate expert may backfire in unnecessary taxes and in problems down the road.

That said, there're a few investors on this board who love to brag how their CPA charges them a lot less, so you may try your luck there.

Your timing is tough however if you're talking about 2019 tax returns. There're less then 2 months for business returns and 3 months for personal taxes left until the deadlines, and some accountants are no longer taking new clients.

Keep in mind: accountants are NOT allowed to contact you as you requested. It's against the BP rules. YOU have to initiate the contact.

@James Lau

Your liability exposure is a question for an attorney, and I'm not one. Almost every investor in syndications invests without an LLC, presumably because it is unnecessary.

@Bilal A.

Like @Ashish Acharya said, it usually does count. But there's more than counting hours in order to qualify for RE Pro, so make sure to discuss it thoroughly with someone who has the specific knowledge and takes the time to review your specific situation.

Here is the sad story of another ambitious (or maybe reckless is a better word) start-up attempting to automate bookkeeping and predictably falling on their faces. But not before burning thru millions of venture capital and screwing hundreds of businesses falling victim to their sales pitch. 
https://www.forbes.com/sites/davidjeans/2020/07/20/scalefactor-raised-100-million-in-a-year-then-blamed-covid-19-for-its-demise-employees-say-it-had-much-bigger-problems/

Some points worth highlighting:

- "Instead of software producing financial statements, dozens of accountants did most of it manually from ScaleFactor’s Austin headquarters or from an outsourcing office in the Philippines"

- "Some customers say they received books filled with errors, and were forced to re-hire accountants, or clean up the mess themselves"

- The annual  contracts mentioned in the article were $23,000 for an e-commerce business and $6,000 (and triple that amount at renewal) for a coffee shop. You can hire experienced personalized help for less.

- "ScaleFactor would pivot to a marketplace model that connected traditional accountants with their clients." This is what everybody else is doing already, including Intuit.

- "At the end of the day... customers were craving a person, rather than a computer to do their accounting." As could have been discovered without $100 mil "invested"

A good lesson for all business owners, I hope.  

If you moved out before March 2020, then you need a special excuse of why you moved out, such as job change, family change, health issue etc. Otherwise, you owe taxes. 

Read the rules and examples here: 
https://www.law.cornell.edu/cfr/text/26/1.121-3

Which only reinforces my point that you need to consider your situation holistically and not just from the narrow angle of avoiding capital gain taxes on a sale that may or may not be the right direction. 

If you do not qualify for a conventional refi loan now, you may not qualify for a loan to buy your next property and be left with no real property investments. Besides, there are various sources of financing, and some are based primarily on the asset and not on DTI.

This would be a long discussion, not on the forum and not with me, as we're full. If all you're trying to do is cash out on the appreciation, have you considered refinancing?