All Forum Posts by: Michael Plaks

Yes. Marriage counseling. :)

Option B: See if your current mortgage is assumable. If so, she can simply step into your shoes (unless you keep all your shoes by the decree).

Option C: Consult a CA-licensed attorney about a possibility of transferring the properties into a land trust and then make her a beneficiary.

Both options B and C may still leave you open to financial responsibility for the mortgage if something goes wrong. Of course nothing ever goes wrong after a divorce, but it's an attorney's area, and I'm not one.

And if you don't find locally, keep in mind that most of us tax pros on this forum work remotely and nationwide. 

@Asish Balu

You're on the right track, but details are more complicated than this. You may be able to deduct the resulting loss if your total income is not too high, under $150k.

Using a professional is always a good idea. You can skip it if you're willing to invest enough time into learning more about taxes yourself or if you're OK with making some mistakes on your taxes. Your numbers at this point are low, so your mistakes will not be huge, either. But mistakes are likely.

Example: you need to start depreciating the rental portion of your property. So you either study depreciation yourself, hire a pro, or leave this deduction on the table.

@Greg Gosselin

Reach out to @Natalie Kolodij

In a community property state it is one Sch C but two separate Sch SE where self-employment tax is calculated for each spouse.

@Matt Darak

You're on the right track. The form is difficult though. So my advice is to not DIY it.

RE Pro has nothing to do with being an agent. There're basically 3 requirements, however each one is more complicated than it seems at first.

1. You need to "materially participate" in your real estate business. In plain English, it means being hands-on, as opposed to merely giving your money to someone else to invest.

2. 750 hours of real estate work per year, which is about 15 hours per week. It has to be real work, as opposed to watching podcasts, and it has to be documented (logged).

3. More hours spent in real estate than doing anything else for money - like other businesses or jobs.

Like I mentioned, it has a lot of small print, so better get professional advice if you believe you or your spouse might meet these 3 tests.

@Patrick J.

Arizona is a community property state. If you create a husband-wife LLC in AZ, it is normally disregarded for tax purposes. It means that there's no partnership return, and your LLC's income and expenses are reported directly on Schedule E for rentals or Schedule C for pretty much everything else, including wholesaling and flipping.

You can still choose to be taxed as a partnership. There're some valid reasons to do so, but it's a long conversation. In some other situations, it can have bad consequences. It's best to discuss it with an experienced accountant, to specifically evaluate your situation.

I'm not aware of any good reason to create an LLP instead of an LLC in your state, but it's worth checking with an attorney licensed in AZ. I'm not an attorney.

@Amnaya A.

There're 3 major reasons to invest in real estate:

1. cash flow
2. appreciation
3. tax benefits

#1 and #2 can switch places, depending on your current financial situation and future goals, but taxes is always #3 in importance.

Ideally, you want both cash flow and appreciation. However, it is not wrong to buy properties with minimal or no cash flow - as long as you're mostly after appreciation. For example, if you're financially stable and secure right now, you may focus on appreciation. But it's a complicated case-by-case analysis that should be done with an accountant or a financial planner, as long as they're real estate specialists. Warning: many financial planners will dismiss real estate altogether, because they cannot earn commissions from it, unlike from selling you annuities or mutual funds.

Your Realtor may actually be finding you good properties, as long as your goals are aligned with his. His "wisdom" however is rather unprofessional and uninformed, if quoted correctly.

I hired her when completing FAFSA and for strategizing to which schools and how to apply. She also had a service to find scholarships, but I did not use it.