Expect court challenges to the deductibility of property and state income tax as there is already recent case law on the subject.

@Aaron Mazzrillo interesting feedback, what happened exactly that didn't work out when you went from California profits to Taxas?

If I set up an LLC, finance the bigger house to pay off the smaller house, could I transfer the smaller house to the LLC to increase the depreciation without a siginificant cash outflow, while protecting myself in not having to pay back a capital gains tax as part of the 5/2 rule?

Hello,I am a RE professional with some experience in Boston(MA), Sao Paulo(BZL) and now working out of Panama, Central America for the past 3 years.I just want to put myself available for questions about Panama and meet people interested in living and/or investing here.Cheers!

Neither one has a state tax, as far as your obligation to your state, I would recommend contacting a CPA in your state.

Unlike passive rental income, the income from an active trade or business is subject to self employment tax (a nasty 15% tax commonly referred to a "social security and medicare" by working folks).

@Pierre Streat look into Simone Sao she also a investor friendly agent .

Unlike passive rental income, the income from an active trade or business is subject to self employment tax (a nasty 15% tax commonly referred to a "social security and medicare" by working folks).

I'm asking this because hypothetically, if the previous owner purchased the same apartment for $5MM years ago and in the offering memo it shows tax as ~$500-600K, and I purchase it for $10MM, would the property tax increase nearly 2-fold just because I accepted a higher price than what previous owner bought at.

What I mentioned above is a seller financing his sale, Wayne gave it for a cash lender.BTW, earned income has self employment tax as well, if you're in the business as a lender.