All Forum Posts by: Paul Allen

Assuming you were reinvesting in another rental property, the $15K invested would be capitalized and you begin recovering the cost of the purchase through depreciation expenses once the new property is placed in service. 

So...(not to argue with @Ashish Acharya), but technically you might be able to write off a very small portion of that $15K.

You are.

If you take possession of the money, you have 60 days to put it into another IRA. If you don't, you will be taxed as if you have taken a distribution of the original IRA. Taking possession of the money between accounts is known as an indirect rollover. You can do one indirect rollover every 365 days. If you do a second indirect rollover within 365 days the IRS will count the second as a distribution and charge you taxes and penalties (if applicable).

In most cases you can move the money between qualified accounts directly, without taking possession of the money. This is known as a direct rollover. You can do as many direct rollovers in a year as you want, so these are generally preferable. Once you determine where yo want your IRA to be held just tell them you want to do a direct rollover from an existing IRA. They should make that easy for you (although your current custodian may drag their feet).

Best of Luck with Your Real Estate Investments!

You are required to adjust the basis in your property by the amount of depreciation allowable, even if you neglect (or refuse) to deduct it from your tax return. When you sell that property you are going to 'repay' the IRS for a tax deduction you never took. 

I am having trouble imagining a loan worth the price it seems you are paying for the one you now qualify for.

Is this true even if the purchased property is not used as collateral on the loan? I thought uncollateralized loan interest could be written off as an operating expense in the year taken. Is this not the case for flipping?

It occurred to me the phrase "allowed to be depreciated" might be confusing. It does not refer to a choice made by the property owner. It means allowed by the tax code/the IRS to be depreciated. 

@William Dolinko Welcome to Bigger Pockets!

Property taxes are specific to states and cities, There is no universal rule on them covering the entire USA. In Virginia a veteran who is 100% disabled is exempt from property taxes, but the disability has to be service-connected. 

You would have to check on the laws governing your area to see if they are similar.

You might also check with a Veteran's Service Organization (like Disabled American Veterans (DAV) or the Veterans of Foreign Wars (VFW)) to see if there is a possibility of appealing the decision that your brother's injury is not service-connected. Depending on the unique facts and circumstances of his case it might be provable that his injury was related to his service, even if it occurred after his period of service. The DAV and VFW are completely free, so it can't hurt to give them a call and explain his situation.

Best of Luck!!!!

If the property was allowed to be depreciated during the period of ownership, then you may have a gain based on the recapturing of the depreciation. Otherwise I can't think of any reason you'd have an adjusted basis that would create a capital gain on the sale. 

Not to beat a dead horse, but the risk is actually pennies to save dollars.

Say you have a 'grey area' tax issue for $100. 

Statistically, if we just pay it our expectation value is to lose $100.

If we venture into the grey area and don't pay it our expectation value is to lose {[$100 PLUS penalties and interest] TIMES [probability of having to pay it]}

If our penalties and interest run 25% total, then we are looking at {[$100 + $25] X [probability of having to pay it]. In which case the probability of the IRS examining your return, discovering the grey area issue, taking the opposite position, and winning on appeal would have to be greater than 80% for your expected losses to be higher than just paying it.

In their best year ever the IRS is never going to get that probability above 2%

At 2%, we are risking an expectation of losing $2.50 by 'going grey' against an expectation of losing $100 by not going into the grey. 

As you said - the value the tax professional adds is knowing which areas are not already black & white. 

[/extreme nerdism]

I guess it depends on one's interpretation of a 'grey area', but I'm with @Michael Plaks on this one. The tax code, while enormously complex, does not provide black and white coverage for every situation. I have found taxpayers can be tremendously creative. They think of things the lawmakers never even dreamed of.  Resolving all 'grey areas' on terms favorable to the IRS would cost my clients much more than what is risked. Probably by a factor of a hundred.