All Forum Posts by: Nicholas Aiola

@Scott McMillan The correct thing to do would be to file Form 3115 to "catch up" on the missed amortization but beware - this is not a DIY type of form.

@Peter Morgan States are beginning to develop their state-specific rules surrounding remote work and nexus as a result of the pandemic. These waters are a bit murky at the moment. Without looking into each state's requirements, I'd have to defer to the relevant states' websites for more info.

@Michael Sauls First, I would suggest confirming your business has a 1099-INT filing requirement. The 1099-INT instructions, Regs. Sec. 1.6049-4, and Regs. Sec. 1.6049-5 would be a good start.

If you are required to issue a 1099-INT, you can issue it to whoever is the primary taxpayer on your sister and her husband's joint tax return (assuming they file jointly).

The 1099-INT issued to you from the bank can be reported on your tax return 100% and reduced by a nominee distribution to the other account owners.

Thanks for the mention @Bill Hampton and @Nancy Bachety !

@Jeremy Staggers +1 for @Michael Plaks

@Carlos Ptriawan Yes, Sec. 121, which is what I was referring to in my original reply. You first need to calculate the total gain, which is the selling price less basis (not purchase price) - remember, you rented it out for 5 years, so your basis is reduced by the accumulated depreciation. Any improvements would increase basis. Lastly, you need to remove the accumulated depreciation from the gain for the next part of the calculation as 100% of the depreciation to be recaptured will be taxable.

Next, you take the years you used the property personally divided by the total years owned (9/14, in your example) and multiply it by the gain above (exclusive of accumulated depreciation). That is your excludable amount under Sec. 121. The remainder is taxable.

@Nina Ning Correct, which is one example I was referring to of how a cost seg study may not benefit your specific situation. 

@Nina Ning Technically, you can do your own basic cost seg study but I wouldn't recommend it unless you are confident that your segregations, fair market values, and asset class lives are accurate enough to win an audit, should one occur. You'll also want to be sure the cost seg study will actually benefit you tax-wise once completed - that's not always the case.

In my opinion, this isn't an area to cut corners. Link up with a CPA first (to make sure the cost seg study will even benefit you) and a reputable cost seg firm to perform the study.

@Carlos Ptriawan In your example, 5/14 of the gain would be taxable, meaning 9/14 would be multiplied by the total gain to determine the amount excludable. Keep in mind that no portion of the unrecaptured depreciation can be excluded - 100% of that is taxable in the year the property is sold.

@Michael Plante You can elect to tax an LLC as an S or C Corp, which would change the income tax implications, but LLCs taxed as disregarded entities or partnerships would not.

You're correct about the benefit of an S Corp but you'd have to look at the entire situation to see if it's the right choice. You can save on SE tax in an S Corp but those savings could very realistically be less than the associated costs (separate tax return, payroll, possible reduction/loss of QBI, more administrative hours, etc.).