All Forum Posts by: Steven Hamilton II
Steven Hamilton II has started 25 posts and replied 5110 times.
Post: Responsible Party Name and Tax ID on SS-4 for My IRA LLC
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Roland Willis:
@Andrew Yu I am curious, how did this all resolve? Did you use your SS# or did you file the SS4 with the Custodian's TIN? Did you file a form 2553 tax classification to the IRS with your custodian as the member/owner? Fantastic thread topic, thanks Andrew!
@Carl Fischer Great explanation, thank you Carl! How does the IRS know to look to the custodian for income reporting if they are not listed on any IRS docs... Is that purely from the LLC's tax returns/informational returns? Or maybe from filing form 2553 or equivalent? Do you offer Tax Compliance/990-T assistance with a different custodian?
The Form 2553 should not be filed as that is to have the entity taxed as an s-corp and a retirement account cannot be a shareholder of an s-corporation. That termination would then create significant issues.
The IRA files a form 990-T to report its net income/loss only if there is UDFI (Unrelated Debt Financed Income) or if there is UBTI Unrelated Business Taxable Income. Finding someone who specializes in it is very difficult to do as there are only a hand full of us. There are also some nonprofit accountants who are familiar with them.
Post: Do I need a Real Estate CPA and a different one for my business?
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
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You will find most accountants that specialize in real estate are far more experienced in business as we work with both active businesses and passive rentals.
Post: LLC Cash Out Refi Tax Question
- Accountant, Enrolled Agent
- Grayslake, IL
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Originally posted by @Richard Andrade:
Hey, thanks, @Steven Hamilton II! That's an interesting article that goes at least part of the way towards what I was looking for. I wish it dealt more with the subject of how the actual distribution is handled than with the interest generated by the distribution, but it's more than I've found otherwise! In the scenario I painted, it would probably be safe to assume the distribution would be far in excess of the basis, so I'm guessing that would not be treated favorably tax-wise. Thanks!
That would depend upon the income/loss of the property each year and the acquisition price. You should be able to ask your accountant directly for the consequences of the transaction.
Post: LLC Cash Out Refi Tax Question
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
That would depend upon the basis of the partners. You could end up with a distribution in excess of basis; however, there is not enough information here to determine that. There are also implications of using loan proceeds to pay out distributions. Here is an article on the topic for you.
https://www.wgcpas.com/396-tax-matters-tax-implications-of-debt-financed-distributions/
Post: LLC and banking and EIN and UBI questions
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
If you open an entity you should always consider an EIN. Issuing 1099s and the like you do not want to use your SSN. Some state tax returns will also require it for reporting purposes.
Post: Sell privately or move it under an S-Corp first?
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Christopher Wasowicz:
@Steven Hamilton II
I had a CPA advise me to start with an S-Corp initially and later I could form an LLC to absorb the Corp when (if?) the company grows and expands. Could you elaborate on your statement, please?
Fire them because that is blatant malpractice. There are a ton of reasons that is a problem. Basis issues for one.
This should help explain it: https://www.forbes.com/sites/anthonynitti/2014/01/28/tax-geek-tuesday-why-you-should-never-hold-real-estate-in-a-corporation/#1019c334693e
Post: Sell privately or move it under an S-Corp first?
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
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You never want to hold rental property inside of a corporation.
Post: Ex-pat in the UK - Double Taxation
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
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You receive a credit on your US tax Return for the tax you paid in the UK. Otherwise you can use the Foreign Earned Income Exclusion; however, for the UK typically the Foreign Tax Credit is best.
Post: Mortgage interest deduction when paying cash for initial purchase
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
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Originally posted by @Ashish Acharya:
Originally posted by @Jean-Thierry Aleman:
Thank you so much! I just went and read it directly from the IRS and I feel much better. Truly appreciate your help @Steven Hamilton II
We had this discussion before. As mentioned above, the 90 days rule is for a personal residence. @Steven Hamilton II, I was under impression that you can use the delayed financing loan to deduct that against the rental property that was bought with cash.
Please kindly correct me if I am thinking this wrong. Lets say you have a business asset, then you take out loan on that asset to go on the vacation, would you get to deduct the interest on the loan? (Since it is not traced to business purpose)
That is the main reason, Congress got rid of the HELOC deduction.
You might still be able to deduct the interest if you use the cash out on another rental property or business purpose. But if you do not use the cash for another business, the interest is not deductible.
If there was an initial loan that you incurred to acquire the property, the refinancing with the new mortgage is deductible up to the extent of the original loan.
So, we had discussed depositing the cash in the bank and taking out loan for the same amount to do the transaction to make the interest deductible when you get bank loan. Or loaning your LLC the cash and using the cash via LLC. The LLC will later refinance your loan with the bank loan.
You see my comment above that it specifically applies to primary residences; however, I have never seen it discussed specifically against business assets; however, I do not know all 76k pages of the tax code and create that disclaimer. I'm of the opinion it does not apply to rental properties.
Post: Mortgage interest deduction when paying cash for initial purchase
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Here is publication 936 which does not specifically discuss rentals; however, it does review mortgage interest of residences:
Mortgage treated as used to buy, build, or substantially improve home.
A mortgage secured by a qualified home may be treated as home acquisition debt, even if you don't actually use the proceeds to buy, build, or substantially improve the home. This applies in the following situations.
- You buy your home within 90 days before or after the date you take out the mortgage. The home acquisition debt is limited to the home's cost, plus the cost of any substantial improvements within the limit described below in (2) or (3). (See Example 1, later.)
- You build or substantially improve your home and take out the mortgage before the work is completed. The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage.
- You build or substantially improve your home and take out the mortgage within 90 days after the work is completed. The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage.
I have never seen anything indicate whether it applies to rental properties as well in my research. It is my understanding based upon my study of the Tax Code that a rental will not fall under those rules especially when we factor in the Interest Tracing Rules
Typically a rental will