All Forum Posts by: Michael Plaks

@Anette Colcock

You're trying to get an answer, but not just any answer. You want the answer that you are lobbying for: it was my money, so I should be entitled. Sorry, this is not how it works. The cash you pull out will not be deductible as a personal expense unless it is used for improving your house.

However, it can be deductible as a business expense if used for acquiring new properties. Two things need to happen for this deduction:

1. The money needs to be traceable (aka interest tracing rules). The short version is that you need to be able to show that the money you used for acquiring new properties is the same money you pulled out of your refi. The 6-12 months waiting period destroys the safe harbor protection, so proving tracing could be tricky if challenged.
2. The new property needs to be placed in service as a rental property. Interest prior to the new property being placed in service should, in my opinion, be capitalized into the basis of that property instead of being deducted right away. Some of my colleagues would disagree.

There is another controversial position possible here. Namely, treating this as working capital for your entire operation, assuming you already have other investment properties. Something to run by your accountant.

What is "out there"? Like among the general practice CPAs ? Under 5% probably.
Among the CPAs who work with real estate investors - I hope 50%.
Among the 20+ tax accountants contributing to this forum - 100%.

Mad after listening to a webinar held by a prominent national tax firm and a prominent national cost seg firm. These guys were drunk on hype and misinformation. Just 3 examples:

1. "SFH investor can write off most of his $150k rehab using QIP." (QIP, qualified improvement property, only applies to NON-residential properties, among other restrictions)

2. "You can apply cost seg retroactively to a property already sold." (Even if you could, it accomplishes absolutely nothing, unless the property was 1031-ed)

3. "A high-earning doctor can offset his income with rental losses if he owns his building and makes a grouping election." (He cannot)

ARGGGHHH!

@Paul M.

Reach out to the firms that do cost seg, for example @Yonah Weiss. They will provide sample reports.

@Todd Groom

You have a choice of 20+ tax experts who contribute to this forum. We all work remotely and nationwide. But our services vary greatly.

Precisely because the mechanism of such personal income aka salary if undefined and subject to interpretation. Banks have no incentive to forgive these loans, so they can impose their interpretation. We shall see.

@Ryan Montes

As this crisis showed, being local is not a good requirement. There're 20+ real estate accountants on this board, and we all work nationwide. 

At least 3 of us are in CA, although not in LA area: @Brian Schmelzlen, @Jana Cain @Matt Ward

No rush, Chris. That point usually comes about 5 years later. ;) 

@Wesley Hoover

You picked up an excellent book, however it is very technical and hard to understand for beginners.

This is not how 1031 exchanges work. You do not transfer $30k, you transfer $130k. You cannot touch the money, it is held in escrow by a 3rd party called a qualified intermediary. 

One of those intermediaries, @Dave Foster, is joining our conversation in a few minutes. He will tell you how 1031s can make you wealthy, protect you from Coronavirus and reconcile you with your ex. Jokes aside, Dave is a great resource.

@David Eng

You should upgrade your advisors and hire people who know what they're doing, like @Brian Eastman. If you have to rely on BP to check your advisors' advice - they are not advisors.

One of the most fundamental advice they apparently failed to give you is that you and your SDIRA are completely divorced from each other. In fact, you and your IRA have a restraining order against each other and cannot come close.

You're still thinking: this is my money, and if I pay for related expenses and travel, it is my business and my deductions. Need to retrain yourself to think differently ASAP. This is your SDIRA's business, not yours. 

No deductions for you. But also - and this is the whole point of SDIRA! - no taxes for you!