STR Loophole Cost Seg

[Joshua Taffe]

I have a quad w/ 2 units on LTR (1 Unit needs Reno, once a tenant moves out) and 2 units on STR after conducting a cost-seg and using the STR loophole with material participation against my W2 income would the entire structure be used, or just the STR units. Would how would the Renovation come into play with partial asset disposition. The basement is unfinished, how would that come into play if I wanted to finish it and put two basement apartments in it. I know this is a lot but I can't seem to find an answer. Essentially would the cost seg active losses for the 2 STR unit business still be able to be used against the W2 income. Yes assuming all the material participation happens.

[Michael Plaks]

@Joshua Taffe

I want to second what @Joseph Palmiero said: this is a grey area, and tax accountants do NOT have a consensus.

Some experts believe that you cannot use the STR loophole on a multi-unit property where only some of the units are STRs. Others believe that you can. It is open to debate.

Bottom line: find out where your CPA stands on this controversial issue, and understand the risk of taking a more aggressive position if you so choose.