All Forum Posts by: Aus Smith

Hey, 

TP would have to directly own shares in the Real estate company to be able to claim the hours as REPS.

Sounds like there might be some more facts of the entity structures since you imply a k-1 will be involved but only reference ownership of property A. If they are simply joint owners of real estate through a partnership, his w-2 hours would not help for REPS status, they would hinder as TP would need to work more hours managing their personal rental properties than working at the w-2 job and meet 750 hours managing them as well. 

Without REPS, losses would be subject to PAL limitation. 

I hope this helps your understanding. 

Austin L. Smith, CPA

Hey, 

Assuming the 721 partnership is a publicy traded REIT, this could further grant an investor further liquidity. Assuming all holding periods are met under the liquid exchange, an investor may be able to sell a smaller portion of the partnership ownership during years where they would expect a low tax bill.

If done this way, the investor could use this as a powerful tax strategy to spread the taxable event over years, lowering the effective tax rate faced from the taxable events.

I have heard professionals compare it to an installment agreement, but with more control. I could also see this as an alternative to installment agreements if they were ever dissallowed by congress. 

Altough, not every 721 upreit has the same liquidity, and this should be considered. I would also love to hear anyones experience succesfully implimenting these strategies. 
Cheers! 

Austin L. Smith, CPA

Hey everyone, 

I'd just like to add to the conversation regarding bonus depreciation. It is possible that with a democratic majority, that they may introduce and pass legislation that could sunset the TCJA earlier than planned. 

Its unlikely, but still a worst case scenario imo.

Section 179 will still be an option. Altough, I imagine other options for accelerated depreciation will be considered for future legislation whatever that may be. Fun speculative conversation. Good Luck tax planning for 2025! I am sure the kind folks here who do taxes here will provide insight into any changes when we have to face them, myself included. Cheers! 

Austin L. Smith, CPA 

Couldnt agree more with number 2. I acknowledged avoiding personal days, but neglected to mention the 14 day rule. I see this being overlooked by tax strategist on social media as well. I can see how I can confuse the issue by leaving that detail out. Thanks for clarifying! 

Hey,

There are a few items to consider, first have you made a grouping election for all of your real estate activities as a real estate professional? If not, do you materially participate in the syndication or are you simply a limited partner? Assuming you spend more than 750 hours managing your properties, you would have Real estate prof. status.   

It sounds like your tax professional would have grouped these actvlivities based on the situation you are describing. You would then be able to claim your syndication losses and your material participation would be determined by the group of activities rather than activities individualy. Therefore, you would take your syndication losses with no material  participation neccesary. You should be able to see this on your return, both treatment and election. 

These are the items to consider with your tax professional. Again, even with REPS. You still need material participation to take losses against ordinary income. Grouping election would be benefitial as you would only need 500 material participation hours for the entirety of your real estate activities to be considered active. Good luck and cheers! 

Austin L. Smith, CPA

interesting thread to read! Seems more complex than neccesary. I can only imagine that the QI implimented this lanquage to prevent something that happened to them on a another transaction. Good luck in finding a QI that is efficient and fits your needs! Cheers! 

I Do not understand why tax professionals refuse to provide the depreciation schedule. 

perhaps they do it so when the next tax proffessional inevitabably request this information from the previous, this will be a key indicator they are not a client anymore. I guess thats better than getting ghosted. Anyways, investors should demand more from their tax professionals.

You have ultimate responsibillity for what is reported on your return. You sign it saying you understand and believe what is reported to be correct. How can you know that if you dont have a copy of the depreciation schedule. Lastly, your bookkeeper should be doing this anyway to ensure depreciation reported on your books ties to the tax return. I will not begin to complain how lazy accountants are when it comes to the AJEs. Again, demand more from your CPA. Being 'busy' doing taxes is not an excuse for not providing these insights into your tax return and bookkeeping. 

Good luck with your endeavors! 

Austin L. Smith, CPA

You definitely want to consider the three safe harbors offered under the 2013 tangible property regs. The deminis safe harbor will allow you to expense invoice line items under $2,500. Under the routine maintenance safe harbor, if you had to do have the same maintenance completed within the last 10 years, you may be able to expense it as routine maintenance. Lastly, the safe harbor for small taxpayers allows you to deduct expenses under a threshold of 2% of the adjusted basis of the property up to 10k. 

I am a CPA from Nevada. If you have any more questions . I would be happy to talk. Cheers! Good luck with your endeavors!

Austin L. Smith, CPA

Hey, 

Awesome post. In regards to the DIY software, it does make sense to get the insurance. In the event you underestimate the section 1245 assets, an audit would simply result in an positive adjustment for the tax liabillity. For a property that clearly has an abudance of section 1245 assets but is below 500k, using the DIY software would be a cost effective way to generate the study. While if there is few to no section 1245 assets, then the risk of overestimates with this application would increase. This seems to lead to the point of necessity for professional judgement and risk assesment. 

I am more comfortable with the idea of the DIY software now. 

Thank you for the information! 

Austin L. Smith, CPA

Hey, 

Yes, this is definitely possible. You will need more than one visit to substantiate an average stay of less than 7 days. It is ideal to get as many stays as possible before yearend. You will want to substantiate your material participation through logs. The material participation test consist of seven test in total. The test you are trying to pass is the 100 hours and no less than any other individual. Another test is that you substantially constituted all participation. Under audit, the auditor will seek substantiation that what you reported was truthful. As long as you can substantiate it with proper documentation, you should be good. If your material participation consists of mostly time to manage bookings, this may not make logical sense with a low number of stays. Just a word of note, stays comped and comped for chartable reason and family members would constitute personal days. Just giving out free stays near yearend will not help in maintaining customer stays. These are the items to look out for with your tax professional. Have them look over your material participation log to make sure they agree. Some preparers may take your word and just say have your logs ready in case of an audit. Most tax preparers include in their engagement letter that you have ultimate responsibility to what is reported on the return. I wish you luck on your endeavors! The IRS has more funding and is beefing up their audits. This doesn't mean that you shouldn't be aggressive with your tax strategies, but you should be diligent with your documentation for substantiation. 

I hope this helps! Austin L. Smith, CPA