All Forum Posts by: Michael Plaks

It does not stay the same, it is reduced by depreciation each year. 

Still need to see the old returns to verify things like past depreciation and suspended losses.

Thanks for the compliment. 

Not sure what you're asking though. If you made a $10,000 improvement to an existing property in 2019, this improvement is a new asset (separate from the original purchase of the property), and you start depreciating it in 2019. The initial asset continues its depreciation, so you can say that the improvement is "added", although it is not technically accurate. If this is not what you asked, please clarify.

Yes, but  people with full-time W2 cannot qualify for RE Pro, and I assume this is the case here.

Half-true :)

You cannot deduct these losses now, but you will be able to deduct them eventually, when you sell the property. 

@Kevin C.

I hope you are not trying to prepare your tax return manually in 2020.

Your tax software will place it in the right spot if you check the bonus depreciation box.

@Jason Hill

I will give you some pointers, but yours is not a DIY project, no matter what software you use. If you do not want to overpay taxes in your situation, you need professional help. That said...

1. "The title agent mentioned..." Argh, he should not be talking about things he does not understand. You had a 3-yr window after moving out to sell the property tax-free. You do owe taxes now.

2. Like-kind purchase does not count. If you wanted to pursue a like-kind exchange (aka 1031 exchange), you needed to engage a specialized company called a qualified intermediary before you sold the property. Game over by now, too late.

3. You owe taxes on the property appreciation (increase in its value between 2001 and 2019) PLUS taxes on all depreciation that you could have taken (which is what "allowable" means). It's more than you expected, I'm pretty sure.

4. Because of the depreciation recapture tax mentioned in #3, you have to adjust for the depreciation that you did not take in the old years. It is not too late to do so, but it is a complicated procedure that requires a specialist familiar with it.

5. You might still be able to delay capital gain taxes, but it also requires professional advice.

Good luck!

@Teresa Thomas

Cannot agree with your CPA as quoted. You do not buy properties for tax consideration, period. You buy them for appreciation and for cash flow, and all of them should be winners in that respect. 

If they happen to save you taxes - it's an icing on the cake. We real estate accountants can help you minimize taxes, but we won't tell you to buy (or not buy) a particular property out of tax consideration.

I did not realize my dog was talking to you. No dog park for him this weekend. PS. Thanks for the shout out, Dave!

@Guy Yoes

I'm not an attorney but, just like @Mike S., I'm surprised at your attorney's recommendation of combining ownership and management in one entity. Most attorneys recommend separating the two. 

Also surprised at his suggestion that keeping cash in a company is a weak point in asset protection. I always thought (maybe incorrectly) that if you're sued, the opposing side will be after your real estate, not your cash, unless you have a real high pile of cash.

Finally, from a practical angle, I'm unsure how you would use two operational accounts (one per unit) for each property when most of the expenses for a duplex are shared. Are you to write two checks for each mortgage payment, utility bill and service call? Seems impractical and unnecessary, because a duplex is one property, not two. If you had a 50-door property, would you be creating 100 accounts - 50 operational and 50 deposits? 

Not trying to argue with your attorney, just mentioning areas of potential concern, maybe worth bringing up with him.

@Kathleen D.

For 1031 intermediaries - @Dave Foster or @Bill Exeter