All Forum Posts by: Michael Plaks

@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

Should not you disclose that this is your own company when giving a "testimonial"? 

@Stan Kaneshige

Yes, this self-certification scares me. This opens the floodgates to abuse, and then the govt will probably overreact, shutting it all down.

Generally, you're correct. But we do not know the full financial situation. What if Mom has absolutely no other income? What if she has some suspended passive losses that would be unlocked when sold? What if she had past capital losses limited by $3k annual allowance? There could be various scenarios where the actual tax impact is minimal or none, without special tax planning. 

Of course, with the revised numbers ($50k instead of $150k), the tax impact will be an issue.

None of that will avoid capital gains taxes.

Once the condo is sold - there is capital gains tax. If Mom sells it (to you or anybody else) - she pays the tax. If she gifts it to you, and you sell it - then you pay the tax, the same tax that Mom would have paid, except for the possible difference in your tax brackets.

So to avoid the tax, you have to keep the condo.

The only other technique is to turn it into an investment (rental) property and then exchange for some other investment property. Still cannot exchange it into your personal home without paying taxes.

Despite myself and @Natalie Kolodij repeating it couple times, you still cling to this popular misunderstanding: a rental property owner canNOT eliminate capital gains taxes by moving back into the property for 2 years. Whether it is a gift or not - does not matter. Please see Natalie's example where she explained how it works.