All Forum Posts by: Nicholas Aiola

@Courtney Duong It could help your case but that alone is not enough. There are several variables to consider when determining whether or not you are a REP and it would be impossible to say without analyzing your specific facts and circumstances.

@Courtney Duong Start-up costs refer to the expenses incurred prior to starting your business. In your example, once your first rental property is placed in service, you are "in business" and costs after that date would not fall under the start-up costs umbrella.

Keep in mind that not all expenses prior to the in-service date qualify to be deducted as start-up costs. If you intend to do your own research, Sec. 195 of the tax code is a good place to start.

@Lynn Gadd Unless you qualify for an exception under Sec. 121(d), then no - you would not meet the use test, which states that you must occupy the home for at least 2 out of the last 5 years. 

@David S. You are out of luck - it is still residential, so 27.5 years for the roof.

That said, Google partial disposition - you may recover some benefit.

@Daniel Vieyra

As @Wayne Brooks mentioned, your profits will pass-through to your personal tax returns via Schedule K-1. Cash distributions from the S Corp are irrelevant in this case.

If you're profitable, you must pay yourself a reasonable salary from the S Corp. It doesn't matter how frequently you pay yourself a salary, just that the year-end total is "reasonable".

Reasonable does not mean arbitrary. Consult your CPA.

@Travis Phillips If nothing else, I'm a man of my word!

You've presented a great list of questions here, however, I wouldn't be able to address the bulk of your concerns because: 1) the specifics of your situation/intentions will dictate the proper advice, and 2) these questions are better suited for an attorney.

However, it sounds like you have a variety of different income streams, all of which are treated differently for tax purposes than the others. For example, stock portfolio (portfolio income), rental portfolio (passive income), and ecomm and agent businesses (nonpassive earned income).

Again, without knowing your specific facts and circumstances, it would be impossible to accurately advise you on proper entity structuring (it is also outside the scope of a public forum) but it is generally a good idea to segregate activities into different entities, specifically separating the nonpassive earned income and the passive income. Grouping rental investments under one main holding entity/Series LLC is a common approach but you may want to explore other options for your other businesses.

I'd recommend consulting an attorney and also a CPA to ensure you have all bases covered.

@Rob Newsom Your resident state taxes all income, regardless of where it is earned. So the short answer is yes - if you have net taxable income from a no-tax state but reside in a state that taxes income, there may be income tax due to your home state.

Typically, your resident state gives you a credit for taxes paid to other states to ensure your income is not double-taxed but this would not apply to you if all your investments are in states without income tax.

When dealing with CA, you'll also want to be mindful of their strict annual LLC fee laws. If you hold your investments in LLCs, you may be subject to the $800 annual LLC fee in CA, even if you don't invest in CA, simply for just being a resident of the state.

@Brian G. The deductibility of the interest expense follows the use of the money, as per the IRS's "tracing rules". Without digging deeper, simply parking the proceeds in a reserve account may not be an applicable use in this scenario to justify a deduction.

If you're both on title and both equally bear  the responsibility of payment, you can split the mortgage interest deduction 50/50. 

@Eamonn McElroy Good catch. I overlooked the word "rooms" in the original post and was responding as if it were separate units.

I owe you a beer!

@Aaron Millis The home would still be split between rental and personal based on bedrooms or square footage most commonly. It would not be 100% personal.