All Forum Posts by: Benjamin Weinhart

Quote from @Laura Kreinbring:

Yes, you’re right about the “weeds”

It’s tax code weeds! lol

Us investors would throw the book right back the irs if there weren’t enough benefits for us to learn it.

Lawyers specialize in it, crazy level.

It's a phrase that my old boss used when I was with my large public firm that stuck with me. It can describe certain things in this world pretty well. And you'd be throwing the "book" back at Congress :)

 Us CPAs/EAs do as well (some more than others), I personally have a Master's degree in the field with a focus in tax on top of my CPA if that tells you education levels required. I've also written/helped write several various legal documents for the IRS/courts. It's not even possible to become a CPA without having at least an equivalent of a bachelor's in accounting (some minor exceptions). Many people who have taken both that I've spoken with also say that the CPA exams are harder than the BAR exams if that gives you perspective. Plus the pass rates are lower for the CPA exams in a large majority of states compared to the BAR. Lawyers do get a little more education time-wise though, so it's all relative.

Quote from @Basit Siddiqi:

One often overlooked item for those who invest in Ohio is not filing the locality returns.

Ohio is a unique state where they require locality returns to be filed in addition to the state return.

 The fun part with Ohio is that half of the municipalities require it, and the other half don't, and there's no real consistency to it. Plus they could tax off of residency and/or income depending on the locality. Being that I live/am licensed in Ohio, I've filed thousands of these returns so they're pretty much second nature to me. About half of the returns I get from newcomers that had a locality return in the PY prepared by a CPA out of state either didn't file at all, or it was done incorrectly. I even remember for a while that some of the big commercial tax companies didn't support local returns.

Plus until last year (might've started for TY 2022, I forget) everything was paper file only. Only recently could you e-file the return for RITA. Still have to mail the rest of them though.

Quote from @Alex U.:

Could a long term lease could be written as a series of short term leases (less than 30 days), and thus qualify income from the rental as "Active" and thus allow the tax filer to file as a "real estate professional"?

 While this does technically satisfy the requirements on paper, it would never hold up under audit and would be considered evasion/fraud WHEN discovered (not if).

Quote from @Karl B.:

Something similar happened to my dad. He had a tax credit and they didn't apply it and then because they didn't apply the credit they claimed he owed money and then charged him late fees.

He tried calling them NUMEROUS TIMES and waited hours and half the time his call was somehow dropped. 

They're absolutely inept. If we ran out real estate businesses like the IRS ran their B.S. we'd be run out of town. 

 The IRS will drop calls for people who wait ~1.5-2hrs on hold. I haven't had this happen recently since the infrastructure bill was passed and they got the $80b over 10 years, but that's not uncommon at all. Best to call first thing in the morning when they open. I think I had a 2 minute wait time in early April which was incredibly shocking as I wasn't even using the priority line (needed a general line specifically for this call). I say that to say they are getting much better with phone response times, and will even do callbacks now.

If you or anyone you know need to call for whatever reason, call the office in Ogden, Utah if you have a choice (some forms list multiple locations to call). I have the highest success rate at getting my client's issue resolved over the phone whenever I call them.

I agree with Michael, no need to get a tax lawyer involved as I've been able to get similar issues resolved over the phone a few times just with a signed form 2848. You could do it yourself as well if you have ready access to a fax machine, but sounds like it may be simpler for you to hand off to someone else. Plus you wouldn't have to be on the phone with the IRS for several hours and deal with all of that headache. Could potentially be finished in a single day with a cooperative phone rep at the IRS, could take longer with an uncooperative one.

Unlike normal tax preparation/planning however, form 2848 would require you to seek out someone with the EA or CPA certification specifically since the individual must be licensed to get the power of attorney status.

Quote from @Michael Plaks:

@Benjamin Weinhart

My experience on this tax forum tells me that highly technical discussions of the Code/Regs nuances are not well suited for this platform.

That said, my 2 cents is that this issue is a matter of interpretation. You're focusing on the language around the word "intent" - an interesting angle, possibly not without merit. I would focus on a different intent: intent of the anti-abuse rule and its reference to "a single unit of tangible property" in (6)(i). 

I think that the intent was to prevent breaking a single UoP into components. Whether it is purchased from a 3rd party or self-produced does not seem to be a factor. 

If we're to accept your interpretation, then the ramification would be to challenge every single instance of breaking UoPs into components based on "intent." Unlikely, IMHO.

 I've seen that too which is a little sad considering that's one of the things I miss from working in my old large public firm.

I can certainly see where you're coming from and I was wondering myself on how the SUoP would be defined since there isn't really a standard definition defined by the IRS with regard to construction/renovation. I think the rule was more meant for manufacturing/machine shops given a few of the examples in the regulation. I think since the tax year still benefits from the 80% bonus depreciation, taking a few extra thousand in bonus isn't worth the risk of additional scrutiny by a tax court. I think this may become more of a consideration if Congress decides not to renew bonus and it continues to phase out. Plus Sec. 179 still exists as well for an accelerated depreciation vehicle for smaller taxpayers.

I know for commercial applications, the IRS will reduce the basis of depreciation for the solar panels by one-half of the tax credit amount allowed (15%). The remaining 85% is subject to bonus depreciation for the part you use as a short-term rental. Assuming 25% of your property is used exclusively for the STR activity for a full year, you'd be able to utilize bonus depreciation for 21.25% of the original installation amount (subject to recapture). If you are installing them in 2024, the amount of bonus depreciation is limited to 60% and you can therefore only take 12.75% in the first year (plus normal remaining depreciation for a part-year asset).

I'm not sure how the split would work between the residential credit and the commercial credit as this may be reported separately with the partial business use allocation happening first. I haven't ran across this specific scenario just yet myself. I'd recommend speaking with your tax advisor to discuss this further as what I said above may be outdated as I know the Inflation Reduction Act changed a lot of the energy credits for both individuals and businesses.

Hello, I'm mostly writing to confirm my suspicions as the regulations are a little unclear/I'd appreciate a second set of eyes to make sure I'm not completely off-base. I'm looking at the proper treatment of the de minimis safe harbor election 1.263(a)-(f), specifically paragraph 6 which details the anti-abuse rule. As an example, a taxpayer is completing their own renovations of a property to save a bit of money with the intention to rent out. Because of this, they're purchasing their own supplies/materials with very minimal labor expenses. It just so happens that none of the individual expenses exceeded the $2,500 rule even though the aggregate cost to construct a set of cabinets (example) may exceed this threshold.

Since 1.263(a)-(f)(6) specifies intent rather than the end result (Unless you think (6)(i) would apply), since the intent of the taxpayer was not to manipulate this election for a tax benefit, my assumption is that they would be able to expense all of the items normally.

Just looking for confirmation as I'm pretty confident my understanding of the regulation is correct. In the event I am wrong though and the anti-abuse rule would be triggered, I assume this would be treated normally under CIP rules?

Hi Stephanie,

You may find it useful to get someone who practices in the space every couple of years and especially after a big law change (i.e. 2025 or 2026 tax year after the TCJA expires). I can certainly see what you mean about using SALY as a friend for most years, but unless you want to stay current on all the state/federal income tax laws, you may want to seek out a professional every few years to double-check.

I forgot to mention quarter 1 estimates are also due today. The easiest way to pay these is directly through the IRS's website if this applies to you.