All Forum Posts by: Benjamin Weinhart

Hello everyone and happy tax day!

Just a friendly reminder that the deadline to file Individual, Trust, and C-Corporation returns is today. Even if you owe tax that you cannot pay today, you should still file to avoid a 5% penalty per month for failure to file. Also, if you cannot pay the full amount, a partial amount will help negate some of the failiure to pay penalty + interest that will accrue.

In the event you aren't ready to file today for whatever reason, or were hoping to reach out to a tax professional. I can almost guarantee you that nobody will have the time to help you today with everyone working to get their client's extensions in (or relax a little after a long tax season comes to a close for many). If this is the case for you, you will want to file for an extension of your taxes so you can have a little more time. This can be done by filing form 4868. There's a few options to file this form:

1. Certain tax softwares such as turbotax and the like have the functionality to electronically file. I believe the IRS may have this on their website as well

2. You can mail the form in. If you mail, be sure to mail to the correct address which can be found on the instructions (first result on google if you google "form 4868")

If a payment is due with any of the above, you can include a check with your mailed form, or you can pay directly through the IRS DirectPay system and select "extension" as the reasoning for the payment. If you're unsure what to pay and things are pretty similar to last year, a good rule of thumb is just do what you paid last year + 10%. This will work for a lot of people and is a simple calculation.

1. Correct, the step up in basis would occur to be the FMV on the date of death assuming a 50% ownership stake. You will need an appraisal for this since property values can fluctuate wildly depending on what time it is.

2. Maybe, this would be considered a distribution of property from the LLC which would cause a taxable gain should the llc not have sufficient basis to take from.

For #3 and for all of your questions really, there can be a lot of hidden complexities depending on your exact situation. You'll want to enlist a CPA who specializes in real estate, trusts, & flow-through entities (this is a somewhat rare combination to find in a small/single-member firm, you may want to look at a larger regional firm to assist you if you can't find anyone who suits you at the smaller level). Shouldn't be any need to get an attorney involved so long as the estate is closed. I've actually had some experience with this in the past and know that you can get everything done under one roof if you find the right one.

I personally would avoid adding 36k minus a 30k just to avoid scrutiny by the IRS. This actually might be illegal of your CPA to suggest since they can't do/suggest things for the primary purpose of manipulating the audit regime of the IRS as it violates our code of ethics. I feel like how you had it up until that point is fine though. If you do get flagged by the IRS, it's a very easy explanation anyway.

 Section 121 only applies when selling, not purchasing (it's not like a 1031 exchange). You would only be able to take advantage on your condo in your current position. You theoretically could use it for your MTR as well if you wanted to live in it for 2 years before selling.

 Hi Michael, good call and appreciate the post as I require all of my clients to get an extension after a certain point in the year. I believe it was April 1st or 2nd for this year. Almost filed for an extension myself but got my return in on Monday as I had a weird break in time.

 Agreed with the selling if they do decide to move. The section 121 exclusion amount is likely going to be worth more than they'd get by renting in TMV terms.

Hi Dom, it's inadvisable to treat the 2nd property as a gift since that's not the intent of what's going on in this case. Best to just combine them for the purposes of this transaction. A 1031 exchange can be a good option because although there is no cash involved in the deal, you would still recognize a gain based on the fair market value of the properties being received over the basis of the property you're giving up (if it's a gain).

 Ope, please disregard my earlier post then, I mistakingly assumed it was a property to rent. You'd want to report this activity on Sch C instead since it's a different type of business activity. Report all of your expenses as you would normally that were paid during 2023. The income from selling the home will be reported on your 2024 tax return. This is assuming the "we" is a husband/wife duo and nothing that would give a bit more complexity such as a partnership. If it is a partnership/S-corp or a state that won't allow a QJV, then you may want to file an extension & talk to a tax professional who can help you navigate through this as that would introduce a lot more complexity into the mix.

I agree with Jonathan. If you're looking at just a pure financial perspective with little/no room for personal comforts, the absolute best thing you can do is live in one of those tiny homes or something like that. It sounds like you guys are doing pretty well for yourselves. I would advise against taking a loan from your TSP because the money wouldn't benefit from any growth while it's out on loan to you.

You're actually in a very similar situation to where I was at personally about a year ago. I had more than enough income to pay for a mortgage on the range of properties I was looking at but I just didn't have a significant enough down payment without tapping into my 401(k) for a loan. I ultimately decided that it was better to reevaluate after a year of saving and I'm now in a significantly better position to restart the process. Plus you have to keep in mind that we are in a climate where interest rates are very likely to start trending downwards, maybe that's worth waiting a bit longer than you otherwise might to pay yourselves in dividends in the future.

Surprising that only 20% of homes have a bathtub as I think of them as a necessity personally. Maybe they'll work with you and make one special for a bit extra? Ultimately, it's more of an emotional decision than anything. There isn't a wrong answer as it's not like you're taking out a TSP loan to go on a vacation or anything. Might just be best to wait for a bit if there's not a pressing need to move.

Hi Mike, the simple answer is that you ignore it for right now for a depreciation standpoint at least. Once you list the property for rent, you'll be able to start to take depreciation on it. As far as expenses for things such as electricity and RE taxes (paid in 2023), those will generally be deductible on Sch E. Given that you have no income, and it's likely you may not meet the material participation threshold for 2023, the loss would then be kept on form 8582 to be used to offset future years of income from the property in the form of a "carryover loss"