All Forum Posts by: Austin Cheatham

From the IRS/Tax perspective, an LLC will not affect the way you are taxed. Assuming the LLC is a single member LLC, the LLC will be taxed as a disregarded entity on your personal return. Which is basically just reported on your schedule E/C and taxed just as normal.

If you decide to put the assets into a trust, it can be handled a few different ways and will all be dependent upon the trust you setup. The trust could start needing to file a tax return or it could all be reported on your return still. It depends upon the type of trust setup as well. This can come with more accounting fees due to potential complex nature of the trust. You would need to consult with a lawyer to set the trust up and ensure the best protection for your situation, and then relay that information to your tax professional. 

Happy to discuss further or help out anyway I can. Feel free to reach out!

Glad to have you. Great community to join with tons of valuable resources. Feel free to reach out if you ever need any tax advice or just want a second look at anything! Always happy to help.

Tons of great resources here on the forums. I would recommend looking around and see who is active and providing solid advice and reach out and see if they are accepting new clients. Typically we aren't supposed to promote ourselves here, so I would look for ones who are consistently providing advice and value on the forums.

Typically in my experience at a large real estate development firm, we worked with local attorneys on the appeal process every year. I would consider reaching out to some local attorneys to see if they have experience in that.

When converting a rental property into your personal residence, there are important tax considerations to keep in mind, particularly when it comes time to sell the property. While you may be eligible for a tax exclusion of up to $250,000 ($500,000 if married) on the sale of your primary residence, any period during which the property was used as a rental is considered "nonqualified use." This means the portion of the gain from that time is not eligible for the exclusion and will be taxed. Additionally, you’ll need to account for "depreciation recapture"—the depreciation deductions claimed during the rental period must be taxed.

For example, consider a property purchased for $310,000, rented for six years, and then converted into a primary residence for two years before being sold for $510,000. The total gain on the sale is $250,000, but $50,000 of that represents depreciation deductions, which must be taxed. Of the remaining $200,000 gain, 75% (6 out of 8 years) ($150,000) is attributed to the time the property was rented and is therefore taxable at the long-term capital gains rate. The remaining $50,000 qualifies for the tax-free exclusion under Section 121, assuming the homeowner meets the residency requirement. Furthermore, during the rental period, expenses like repairs and insurance were deductible, but these deductions end when the property becomes a primary residence, with only mortgage interest and property taxes potentially deductible as itemized deductions.

In short, converting a rental property into a personal residence can provide some tax advantages, but you’ll need to account for taxes on both the depreciation and the portion of the gain from the rental period when you eventually sell the home. Only the gain from the time you used the property as your residence qualifies for the primary residence exclusion.

Happy to help look at or run through any scenarios!

You've definitely came to the right place to find some great connections. Tax professionals here aren't allowed to directly promote themselves, but I'd recommend looking around at the Financial, Tax, & Legal section and find some accountants sharing good information and reach out. There are several here on the forums with a ton of knowledge. Great place to find one related to real estate!

So you can't do a 1031 exchange towards a loan paydown on a property you already own. A 1031 exchange would require you to identify a new property and use those proceeds towards a property.

Hey, yes, you are partially correct. Passive losses cannot be deducted against ordinary income. There are a few exceptions to that. One being you are allowed losses up to $25,000 to the extent your income is $100,000, and then that $25,000 is limited up to the point you hit 150k. After 150k passive losses would be disallowed and then carried forward to be used against future passive income. You would only receive the full amount of losses in the year of a sale. Another is qualifying as a real estate professional. But very unlikely with W2 income and a full time job.

But this is an awesome concept as you could basically collect rental income for several years and never be taxed on it due to passive loss carryforwards if those build up. 

Feel free to reach out. I'd be happy to discuss your situation and answer any questions to your situation.

This is a pretty in-depth calculation that should be handled but a tax professional. I would reach out to your tax guy and see if he can provide some guidance. This type of work would take several hours to review. I looked at it for 5 minutes, here are my notes.

In general, the stepped up basis portion upon a partners death would only apply to the partners ownership portion. It is also important to note that the stepped up basis would flow through to the deceased partners estate K1 and estate return to start. So in the initial death year, the partners estate would receive the benefit of stepped up basis until it is then passed along to the heirs. 

More than likely going to have to capitalize the bathroom renovation and depreciate it. Not sure that $11,000 would be enough to justify the cost of a cost seg. All of your tax savings may be eaten into via the cost seg price itself. You could try and itemize the invoice and DIY the cost seg for the bathroom reno. I would work with your real estate tax professional on that piece.

More than likely looking at capitalizing that 11k and depreciating it, unfortunately. 

Happy to take a look at what you have to see if there is anything that may help.