All Forum Posts by: Bernard Reisz

@Brad Hales To understand the answer to question it's important to understand both cost seg and retirement account taxation. 

Cost seg is simply the art and science of teasing out the individual depreciable components of a multi-component asset. No more, no less. In other words, it's does not represent special tax treatment that an account has to qualify for. So, every taxpayer can use it, so long as they have use for the additional deductions. 

Retirement accounts are taxpayers, just like individuals. They just have special treatment exempting them from certain chapters of the tax code and subjecting them to others.

At the risk of stating the obvious, you and your retirement accounts are all separate taxpayers.

If you invest in a syndication that uses leverage using a retirement account, it will receive a K1reflecting income/loss just like any other investor. Hopefully (but not so likely), Box 20 will provide the info needed for UBIT calculations and filing. 

@Taylor L. Honored by the mention! 

A great & popular resource is the podcast episode you hosted. 

@Eric Parrow 

Following are some helpful tips, but ultimately you're going to have to find a tax advisor.

- Long-term real estate holds should not be in an S-corp. That is one of the few rules that have almost no exceptions.

- Having diverse streams of income does not disqualify anyone from having a 401k/QRP

- 401k plan loans have rules and there's case law addressing appropriate interest rates. There is latitude, but there are rules and guidelines.

Can't be emphasized enough that it's best to get started with straight-shooting advisors & service-providers from the get-go. Some missteps - but not all - can be rectified.

Here's some helpful perspective, gleaned from experiences in many areas of tax & financial, without addressing the specific company and trademark that are being discussed.

Establishing a 401k/QRP for someone that doesn't qualify can entail tax risks that greatly outweigh any purported benefits of 401k/QRP. Any provider that promotes a specific course of action w/o informing you of the risks presents multiple issues:

1) Such a company is not focused on you; they are focused solely on your credit card.

2) 401k, QRP, SDIRA, LLCs, tax, asset protection, etc. are areas of complexity and you can't possibly identify every risky tax position and protect yourself. The best you can do is find a provider that aims to inform you of any-and-all pros, cons, & risks.

3) Whenever the IRS does start targeting abusers, you don't want to be riding on the leaky ship with the big bullseye on it.

The upshot of all this is that for anything tax related, find someone that's focusing on you and trying to help - not someone promoting a one-size-fits-all approach.

@Raj Kapur Loaded question! 

Short answer: Cost seg deductions from real estate rental assets are subject to Passive Activity Loss Limitations. Must you be a Real Estate Professional (for tax purposes) to benefit? Not necessarily, but very likely that you do; if your income is between 100k-150k and you "actively participate," you may be able to deduct up to 25k. 

@Marlen Weber I actually discussed many of these topics on Best Ever Real Estate Show! :) 

@Christopher Romeo You've got multiple options, but "house hack" with a Self-Directed IRA-owned asset is probably not going to be one of them.

Flip is definitely doable, so long as all the rules are followed (https://www.biggerpockets.com/member-blogs/9734-the-self-directed-investor).

In the current environment, you would also want to explore options created under the CARES Act that provide greater flexibility.

There are likely going to be multiple routes to consider for using funds that are currently in tax-sheltered retirement account either (a) to invest in real estate in your own name outside of the retirement account - by pulling the money out through distribution or plan loan or (b) to invest in real estate in the name of the retirement account within the retirement account, each with different tax attributes:

• Taxable Distribution w/ 10% penalty
• Taxable Distribution w/o 10% penalty
• Coronavirus-related distribution (no 10% penalty and tax-management flexibility)
• Non-taxable plan loan to invest in your own name
• Invest within a retirement account (e.g., IRA/401k/QRP) w/ no personal income tax liability

@Yonah Weiss ALWAYS a HUGE honor to be mentioned by you!

@Andrew Flora Sounds great! And... in 5 years now will be in next election cycle, with new names - no Trump or Biden (even if Biden wins now, would not be surprising if he's unable to do a 2nd term) - new issues...etc. We're so focused on the present that it's hard to envision a post-Trump/Biden world!

@Andrew Flora Lots of great info on this thread. For those derive tax benefits from cost seg, it's a "no brainer" if you can work with a reputable and cost-effective firm. 

Not everyone derives benefit from cost seg, and the good firms help you and your tax advisor determine whether or not you should proceed with the study.

Another monkey wrench in all this is Biden's tax plan for real estate investors. My resource for all things cost seg is @Yonah Weiss.

Kudos to @Clint Harris for using a well-thought-out strategy! The only iimpediment to executing your strategy appears to be misinformation supplied by a service-provider - and, now that @Yonah Weiss has chimed in, you can connect directly with the highest-quality cost seg resource available!