All Forum Posts by: Michael Plaks

@Brian Schmelzlen is in San Diego area.  @Jana Cain and @Matt Ward are in SF area.

As to a remote accountant - there are about 20 of us here on this forum, working with clients nationwide, all real estate experts. Just browse the forum and contact whoever you like.

The shortest answer is: it is marriage. Easy to get into, and everything is rosy on the wedding day.  :)

For alternative structures, I would need to know your plans and resources, as I mentioned should be the topic of that discussion with your future accountant.

On the right track. On your W9, put your name and the EIN.

You can also create one or more DBAs and use them instead of your name. People do so for marketing and for privacy. 

@Mora Clark

If you want an answer - it's best to tag the right person. You tagged some other Michael  :)

You can only have one EIN as a sole proprietor. It is tied to your SSN in the IRS system, and you should use it for ALL businesses you operate, including freelancing and rentals. You will give it to your PM and to your bank. As a business name, you can use your own name or you can register multiple DBAs. Just don't use my name.

@Navid T.

This is a great question, but it does not have a simple answer. It really needs an in-depth discussion with a tax expert specializing in real estate.

There is a major distinction between a developer and an investor for tax purposes:

Developer buys, subdivides, maybe builds and sells. He pays what you call regular income tax PLUS 15% self-employment tax (Soc Security/Medicare). Combined, it can be anywhere between 15% and 40%. Will be eligible for the new 20% deduction.

Investor buys, waits for time-based appreciation, usually rents, and ultimately sells. She pays long-term capital gains of 15% and no SE tax. (For full disclosure, the 15% can go up to 24% for higher-income folks.) In addition, she pays 25% on the depreciation recapture. Not eligible for the new 20% deduction.

The trick is determining whether the second part of your deal qualifies for the investor treatment. It is a grey area with many gotchas and a long history of litigation between taxpayers and the IRS. There're also some tax planning strategies designed to fortify your investor position. Like I said, this is not for a quick online answer.

@Steven Whalen

Good list from @Lance Lvovsky. I would start elsewhere though.

Question #1: do you think we should, in fact, form a 50/50 LLC for our partnership? If he immediately answers yes - thank him and leave.

The correct response is: what are you trying to accomplish by partnering? And then quiz you on your plans, your resources etc. Hint: 50/50 LLC is usually the worst way to do business together.

@Mora Clark

Yes you can. I am surprised nobody said so on the original post 3 years ago.

Your EIN and SSN are cross-referred in the IRS computers.

@Mike Barry

Yes, your income will be lower both for tax purposes and for loan underwriting purposes.

Lenders look at your ability to pay back the loan, and stashing money into your retirement account does limit the money available for repaying the loan.

That said, declining to fund your 401k just to qualify for a loan may be short-sighted. Worth a case-by-case analysis of your goals and means.

BiggerPockets does not allow posting contact information of specific people who are not BP members. Contact me directly if you want our local Houston references.

I believe the deduction will be taken at the partnership level and built into your K1.