All Forum Posts by: John Woodrich

Welcome!  Sounds like you have a good start, hopefully 2017 leads to new properties for all of us!

You couldn't pay yourself to manage the properties, that is a prohibited transaction.

I got lost reading the above.  If you have a wage at an employer, you have self-employment income.  

It sounded like you were considering purchasing an investment (in a tax deferred account) and paying yourself? The only way you can pay yourself out of a tax deferred account would be for services you are providing to the IRA such as annual reporting requirements, Unrelated Business Income Tax returns, etc. You can't pay yourself for working for the properties and you surely can't live in a property owned in your tax deferred account! These are the definitions of prohibited transactions.

There may have been a comment about not getting a loan on for properties in a self-directed IRA, you can but it must be non-recourse.

I am concerned that you are piecing this information together by talking to investors and other non-professionals. I am also concerned that you may have already triggered a prohibited transaction... I would highly recommend you talk to a self-directed IRA or Solo 401(k) expert. These transactions are very touchy and there are many losing court cases with big dollars out there.

As a disclaimer I didn't read the other responses above.

If you claim the deduction on your return it will likely go through.  You will note however that IRS form Schedule E (where you report rental income) does not have a line for Travel costs because they are not typically ordinary or necessary expenses in a rental activity.

Here is an IRS explanation and you can see how it fits your situation: 

https://www.irs.gov/taxtopics/tc511.html

I have had many clients ask this question over the years, if you are audited it is the first thing they will look at and likely the first expense they throw out.  If your trip is more business than personal you will win but realize the agent will look at it from the standpoint that you likely left DC in the winter for a warmer climate.  Did you bring your family?  Would be a big strike the wrong way.

Rant over - you likely have no grounds for taking the deduction but if you claim it you will probably succeed.  

An LLC is formed under state law, some states will allow you to convert your LLC to an S-Corporation, some will not. For most people, this doesn't matter, they just want to file taxes a certain way. I am assuming you have an LLC under state law and you are currently classified as a disregarded entity because you are the only shareholder. You can elect to file taxes as an S-Corporation, you legal structure will still be an LLC. Talk to your tax advisor about forms 8832/2553 and the timing of the elections.

Depending on what you are using the LLC for this may be a bad idea. Generally you do not want to place real estate into an LLC however there are situations it would be advisable.

@Pavan Sandhu you revived a post from 9 months ago.

At this point, if he hasn't already, he should schedule a meeting with his CPA.  There is a lot going on there, some of his strategy won't have a lot of effect (deferring SE taxes if he is already over the SS limit) and to answer this correctly one has to know more facts.

@Brian Nordman there are permissible methods of depreciation and non-permissible depreciation methods.  You using your "finance" hat could get the IRS to come in and make a negative adjustment if you are not correct in your methods.  

At the same time, a finance guy like yourself may understand that a deduction in a year where you have no income is not as valuable as a deduction when you have a lot of income.  

@Joseph Lee As far as smoking goes, I would have a no smoking policy in the unit.  In regards to medical marijuana - in MN I believe the only medical marijuana is used via a nebulizer or a pill, it isn't smoked conventionally.  This could have changed.

I wouldn't say that all you should worry about is the appearance of discrimination, I would worry about doing it whether you are trying or not.  I haven't listened to the landlord book but discrimination is a real issue, especially when you get closer to the cities.  I would highly recommend you take the MHA class.  It has a conservative feel to it however it will tip you off to things you haven't thought of before.  When renting your duplex you can choose whomever you want as previously mentioned.  You don't have to worry about discriminiation issues.

Here is a small kitchen we did back in the day:

http://www.zillow.com/homedetails/610-Texas-Ave-N-Hopkins-MN-55343/1877918_zpid/

 The cabinets were from ADI Supply, solid wood, soft close doors, ball bearing hinges, etc.  Not many cabinets needed but the quality was there.  Entire kitchen - cabinets, granite, (used) stainless appliances cost just under $6,000.  Not sure where the cabinet over the fridge went....  In hind sight I would have made some changes but this was a cheap reno.

@Jay Hinrichs you are correct that when you are house hacking or when you are renting a duplex you can discriminate however he mentioned that they are subletting an apartment.