2018 Tax Horror Stories

[Kevin Gray]

I hate to be a downer, but with a significant overhaul of the tax code recently we are seeing first hand some RE investors (and individuals) get hit with huge tax bills and sometimes penalties.  There are tremendous benefits in the new tax code, but can be very challenging if you're not working with a pro.

Was curious to hear some "horror stories" out there.  Maybe cautionary tales that can save investors tens of thousands of dollars in mistakes.  I'll provide one we came across....

We met with an investor who cashed out all of their retirement accounts (under 59.5 years old) to invest in an opportunity zone.  The problem was it was not a qualified opportunity zone FUND, they just bought the  properties and proceeds from retirement accounts are not capital gains!  Throw in the 10% penalty in addition to the income taxes owed on the distribution and these individuals found themselves with close to a 6 figure tax bill.

[Jay Hinrichs]

Originally posted by @Kevin Gray:

@Steven Hamilton II

Steve, nice to meet you too.  

Obviously I'm newer to BiggerPockets with only 7 posts.  Not a very welcoming environment around here it seems like....

don't worry about all the replies from the Peanut gallery.. just hang in there you will figure out who's who over time.

one thing about BP everyone has an opinion.. and on tax matters half the time the CPAs are all arguing amongst there selves.. 

keep in mind from my cheap seats all the CPA s I have worked with have levels of how aggressive they are comfortable signing off on.

I went through this with my Portfolio interest program for foreign investors.. my long time CpA just could not get behind it.. I since switch and new CPA saw no problem with it.. and I spent 15k on prepping those notes and opinion from top law firm on the subject and my old CPA still argued it could not be done..  so its how a cpa interprets the code.. just like attorneys. until there are final rulings who knows right.