All Forum Posts by: Michael Plaks

@Lyall Storandt

I don't believe BP prohibits referrals, except self-referrals. 

Your brother will not qualify for RE Pro if he has a full-time job. One of the requirements, besides the 750 hours (not 1,050), is that he spends more time in RE than in any other money-making projects, including jobs. So if his job is 40 hours a week, he would need to spend another 41 hours each week in RE - which is impossible. 

If he is married, and his wife does not have a full-time job - maybe she could qualify. RE Pro is a very complicated topic, and should be discussed case by case with a tax pro.

This sounds about right 

@Ashish Acharya

I don't believe you're correct on this one:

                    Held for 10 years - 100% of gain reinvested

                    Thus, if held for 10-year, total capital gain that was reinvested is permanently deferred.

My understanding is that the 10-yr applies to part B - step-up of basis for the investment inside the fund. The originally deferred gain will have to be recognized no later than 2016 (which is before 10 years anyway!). You can get a discount of 10-15% if you hold it for 5-7 years, but the rest of the deferred gain must be recognized. 

I don't think you get a permanent deferral with OZ, unless you follow-up with a 1031 - which may or may not be allowed in combination with OZ.

Folks, this article provides a very helpful side-by-side comparison of 1031 v. OZ

@Robert Watts

I hope you did not miss the critical point mentioned by @Alan Rohrer: there are NO capital gains when you are flipping. Capital gains apply to rentals, not to flips. Everything related to capital gains, such as depreciation, cost segregation and 1031 exchanges - none of that applies to you.

The most important "strategy" to minimize taxes in flipping is to diligently record everything you spend, and also assign each expense to a specific property or to general business overhead.

Depending on your numbers, you may also want to do some proactive tax planning.

This is why, just as Alan suggested, the most important thing is expertise, not physical location. Being local is a bonus, but only if that accountant has real estate expertise. If you're open to a remote service, there're about 20 accountants specializing in real estate on this very forum.

Best luck!

Yes, I was also wondering why the CPA's name has to be so closely guarded  :)    

@Wei Cho

I second the recommendation of @Logan Allec - provided he is willing to accommodate the relationship you're proposing.

To be honest, I would not - if you asked me. What you're asking for is free ongoing service (yes, it is service, because it takes our time) in exchange for one annual paid job. It's like expecting free appetizers or drinks from a restaurant year-round because you bring your family there once a year for an anniversary dinner. Or expecting free cleaning from your dentist because you will come to him when you need a crown. Or a free oil change from your mechanic because he is the one you use for major work.

I know we live in the freebie culture, but you use the word "relationship." Relationship involves respect. If you want a win-win relationship with you future CPA, I suggest you approach it with due respect for his/her time and expertise and not expect freebies, at least not until the relationship is strong. (Yes, I will do many favors for my long-term loyal clients, but not necessarily for someone I just met.)

@Eric Nelson

In your example - yes, it will reduce your adjusted gross income (AGI) from $110k to $105k. ("Taxable income" has a specific meaning, different from how you use it, but it will also go down by $5k.)

At $110k, you have room to "lose" up to $20k. At $130k, it will shrink to $10k. At $150k, it will disappear.

A good tax accountant can help you squeeze more losses out of this property - maybe $10k or $15k, instead of $5k.

Everyone - see also another thread on this topic