All Forum Posts by: Nicholas Aiola

@Theodore Ehlert If you materially participate in the STR and keep the average length of guest stay to 7 days or less, the loss (including bonus depreciation) is nonpassive can offset any type of income.

Keep in mind, there are limitations on how much of a loss from the STR you can deduct in a given year - Google "excess business losses".

@Aron Rodriguez If you place the property in service in 2022, you will be able to take bonus depreciation on eligible assets. If the property is not placed in service until next year, there will be no rental deductions available to you this year.

@Angie Cal Yes, it is, but depending on the cost of the home, the cost of implementing the cost seg strategy may not be worth the benefit it provides.

You're in the right spot if you're looking for RE friendly professionals. BP is a great place to start - most of us on here offer a free intro meeting to provide more info on our firm and services.

@Lawrence Ng There certainly are, but rental losses affect everyone differently depending on income level, level of participation in the activity, other investments, etc. You can deduct all ordinary and necessary rental expenses against rental income (mortgage interest, property taxes, insurance, utilities, repairs, etc.). 

That said, you never want the tax tail to wag the dog, meaning don't make a bad investment just to justify it with potentially deductible tax losses - rents will increase over time, but so will expenses.

@Ross Wagner It depends on how the activity for the rental is classified. If it is a long-term rental and you are a real estate professional, yes; if it is a short-term rental and you meet the criteria to classify the activity as nonpassive, yes. This is complex and situational, but it is possible to offset a good chunk of the gain with the strategy you mentioned, as long as it's done correctly.

@Shahar Katz Good questions! Limited partners typically aren't entitled to benefits and deductions like that. The Operating Agreement of the partnership spells out who is entitled to what and how certain income and deduction items should be treated for each class of partner. Keep in mind, fair does not always mean equal - you can structure different capital percentages, profit and loss percentages, benefits, unreimbursed partner expense details, etc. 

@Ihor Onyshchenko The $75k is an investment asset on the balance sheet.

@Chris Yeung I have seen this recently but haven’t gotten to the bottom of it yet. The software we use allows for electronic filing of 990-T forms but we have received e-file rejections with these notices to follow.

The IRS is painfully slow and backed up, so I’m not sure how long resolution will take. 

@Chris R. Gallo This is a good question and a difficult one to answer completely. The first point to address is that the recipient of a gift is never taxed; the giver is who would have the reporting responsibility and (possibly) tax liability. Secondly, banks don't want to see loans from others to help you cover your down payment because they don't want any additional encumbrances on the property other than their own…so they require a gift letter. Lastly, the bank and the IRS don't communicate, meaning a gift letter for the bank doesn't alert the IRS that a "gift" was made. Interpret that however you like.

@Erik Browning It is usually a tag team effort between your CPA and attorney. The attorney drafts the operating agreement and the CPA reviews for any tax gotchas. Entity structuring advice is specific to each investor.