All Forum Posts by: Paul Allen
Paul Allen has started 18 posts and replied 458 times.
Post: Brrrr, Househacking, and taxes Oh my

- Financial Advisor
- Virginia Beach, VA
- Posts 502
- Votes 508
@David Roberts - great question!
The date you are concerned with is "the date the property is placed in service". Repairs done before that date are considered capital expenditures. Repairs done after that date are considered an operating expense of the business.
Capital expenditures prior to the unit being placed in service are added to the depreciable basis of the property - meaning you have to deduct the expenses over 27.5 years.
Operating expenses can be deducted entirely in the year they occur.
You do not need to have a tenant in place for the property to be "placed in service". It just needs to be 'available' and 'ready'. to be used in your business. When you hold it out for rent, it is placed in service. (Use some reasonable judgment. You can't realistically make a unit 'available' if it is uninhabitable because there is no roof.
Side note: certain items (such as replacing an HVAC) are considered capital expenditures even after the unit is placed in service.
Good Luck and Go Buckeyes!
Post: Withdrawing 401K at 59 1/2 and using to buy a House.

- Financial Advisor
- Virginia Beach, VA
- Posts 502
- Votes 508
@Nik Sharapov taking a large lump sum withdrawal from a retirement plan would likely be a tax DISadvantage. Enough to buy a house would likely get the withdrawal/income taxed at higher marginal rates than it would be if he withdrew it over a number of years.
Post: Recapturing depreciation and filing taxes

- Financial Advisor
- Virginia Beach, VA
- Posts 502
- Votes 508
@John Koontz You got some really bad tax advice.
When you sell the property, adjusting the cost basis for the depreciation "allowed or allowable" is not optional. That means that even if you did not take all the depreciation you were allowed to take, you still have to adjust (lower) the basis for all the depreciation that was allowable. And THAT means you are going to pay "depreciation recapture" even if you didn't take the depreciation expense.
The only rational tax strategy here is to take the depreciation expense every year.
Best of Luck getting this straightened out.
Post: Mortgage Interest Tax Deduction is better than I realized?

- Financial Advisor
- Virginia Beach, VA
- Posts 502
- Votes 508
@Nick Eckemoff you seem to be confusing two separate things:
The mortgage interest for rental properties is deducted as a business expense on schedule E and does not impact whether or not you would claim the standard deduction or itemize your personal deductions.
Mortgage interest for your personal residence is claimed on schedule A if you itemize - or you can opt to take the standard deduction.
Post: Finding/Keeping 'The Right' Commercial Tenants

- Financial Advisor
- Virginia Beach, VA
- Posts 502
- Votes 508
@Kyle Erthner Building management does not allow tenants to put up their own signage.
Post: Finding/Keeping 'The Right' Commercial Tenants

- Financial Advisor
- Virginia Beach, VA
- Posts 502
- Votes 508
In Oct 2015 I leased a single office in an office suite (4 offices and a waiting room). I was sub-leasing from the gentleman who was leasing the suite. In March 2016 (middle of tax season for me) he announced he was moving his business to Florida. Building owner told me I could pick up the lease on the whole suite or vacate. I picked up the lease on the whole suite. (for 3 years)
I've held the other 3 offices in the suite out for sub-letting for more than a year. I am running at just under 50% occupancy rate. I advertise on Craigslist, and my eyeball comparison of the other offices available in my area tells me the rent I am asking is under FMV. Yet I get very few inquiries.
I'm not trying to turn a profit on this, I just want to offset my leasing cost. I don't need the whole suite. It's a professional office building Class B/B+. Good location. Lots of parking. Not suitable for massage parlor, tattoo artists, or band recording studio. Perfect for a professional who needs a quiet place to work and/or see clients.
How do I find that target demographic?
Post: Real Net Worth (Scott Trench model)

- Financial Advisor
- Virginia Beach, VA
- Posts 502
- Votes 508
Originally posted by @Scott Trench:
This is in contrast to a primary residence, which may appreciate in line with inflation but does not generate income.
Fairly certain you'd lose that "no income generated" argument to the IRS if you sold that appreciated primary residence in less than 2 years. ;-)
Post: Driving for Dollars deductible?

- Financial Advisor
- Virginia Beach, VA
- Posts 502
- Votes 508
Originally posted by @David Lecko:
Entrepreneur Magazine has a blog out there about the top ten questions you should ask when selecting an accountant. One question from the article is something like "Would you consider yourself a more aggressive or conservative account," suggesting to me there might be some personal choice on something like this.
Rules for deducting vehicle expenses.
The personal choice is in how often you want to lose at audit. Some tax professionals don't mind losing at audit. Others would rather eat directly out of a dumpster than lose at audit.
Investors should also be aware there is an unequal distribution of risk-reward when taking an aggressive position on a tax return. If the taxpayer claims mileage expenses that are subsequently disallowed the taxpayer has to pay the tax, some interest, and possibly a penalty. If the tax professional (me) helps a taxpayer claim mileage that is subsequently disallowed then the IRS has found a tax preparer that plays loose and fast with the rules. They aren't stupid. Suddenly a significant percentage of my clients are getting audited. That's not going to be great for my business - a higher risk than paying some tax and interest.
So, keep in mind, while it sounds cool to have an aggressive tax professional, s/he isn't being aggressive on only your return. S/he is likely being aggressive on everyone's return - making it more likely you will be proving your expenses to the IRS at some point. Keep good records!
Post: How can a financial advisor add value in this investor community?

- Financial Advisor
- Virginia Beach, VA
- Posts 502
- Votes 508
Originally posted by :
It has been my experience that most of the planners I have met don't like real estate investing for 2 reasons - they don't understand it and more importantly don't get a commission.
You aren't talking to planners. You're talking to salesmen. (And I think you know this!)
It's natural to be confused. You need zero credentials to call yourself a "Financial Planner", so salesmen frequently market themselves as planners. It gives us real financial planners a bad name.
Good luck @Nic Breen!
Post: How Much Do You Pay your CPA for Tax Preparation?

- Financial Advisor
- Virginia Beach, VA
- Posts 502
- Votes 508
There's tax preparation and then there's getting the books organized so that tax preparation is possible. When preparing tax returns, my fee difference between landlords who bring me a spreadsheet and landlords who bring me a shoebox full of receipts is significant.