All Forum Posts by: Zachary Bohn

@Pat L.  My point is that unless they are filing as real estate professionals, the best they could do was lower other rental profit to zero they can't really offset other income. That isn't going to help someone when they have a huge capital gain and depreciation recapture. 

As @Eamonn McElroy said tax planning and mitigation is done ahead of time. I've had several clients who don't mention anything until after they sell a property or when their taxes are being prepared. 

@Tom Makinen they aren't necessarily shares, but membership interests and you can sell them. It is very complicated as you mentioned and should probably include a CPA and lawyer

@Pat L. large repairs and improvements have to be depreciated that isn't really an option. If they had to pay $70k in taxes they wouldn't be able to create losses from the rentals that would've been able to offset the gains either. Selling several properties in one year without doing a 1031, is pretty much always going to result in high taxes unless you have carryover losses.

@Aaron Roggensack

If you are putting all of the properties into a series LLC or a Holding LLC with several single member LLCs the top level should file as a partnership to allow for maximum flexibility. This would also allow you to take a guaranteed payment for your management fees, which you will SE tax on. Until you get to above about $50-60k, creating a separate entity and filing S-Corp return doesn't really make sense since you have to take a reasonable salary for the services you provide to an S-Corp. Taking a guaranteed payment from the LLC keeps everything in one spot and won't require you to file a Schedule C reporting the income.

Once the properties are in the LLC it would not be suggested to take the properties out for personal use. There can be large tax consequences for that. If you are putting properties they should only be intended for business purposes in the future.

@Nicholas Kitchen as @Lance Lvovsky said a cost segregation study will help expense some parts of the property faster, but since you will most likely be limited by PAL rules you won't really be able to create losses to offset your W-2 income as @Eamonn McElroy noted. 

@Connor Corkrin 

@Tim Herman

@Tim Herman is right regarding the umbrella insurance .

You can still deduct expenses without an LLC. The big issue with wanting the property in the LLC is that the LLC can't have a VA loan. Also you don't really want a personal asset in an LLC. Are you only renting out rooms in the house? If you are just renting out rooms, then all expenses will be allocated based on the portion of the house you are renting out. If you have more detailed questions let me know, I'd be happy to help

@Connor Corkrin for a house hack it is probably best to keep the property out of the LLC, especially if you are utilizing a VA loan. Umbrella insurance is probably the best route

@Joshua Seeley 

If you use a series LLC like that then each series will be a single member LLC and will flow through to the S-Corp. You generally do not want to hold appreciating assets in a corporation. The rentals should be in a separate entity all together and the property management, flips, and construction in a S-Corp

@Casey Kooiman

1. Creating an LLC with multiple member is pretty straight forward, a bigger issue is the split of everything. If it is going to be a straight 50/50 deal then you probably won't need an operating agreement right away. When you set up a multi-member LLC you'll be required to file a partnership return as well reporting the activity.

2. As @Jacob Sampson mentioned you will record the deposits as capital contributions to the LLC for each of you. If you aren't familiar with this you should talk to an accountant to get you started. I'm a CPA and would be happy to help if you have additional questions.

@Nat Rojas If you are paying them interest then you need to send a 1099-INT at the end of the year to them and the IRS.