All Forum Posts by: Brandon G.

You are correct. The QBI is based on the net income of the business. So if no net income, no QBI....

@Dylan Vargas Yes, none of this adds up with the company. That is why I'm questioning how the actual real estate law works on this. They claim that they had a contract with the old homeowner from 2008. 

The homeowner was foreclosed upon, house became REO, we bought from the bank in approx 2014. Seems to me like they should have reclaimed the tank if she wasn't fulfilling the terms of her agreement (and probably had years to do it in the foreclosure process) if it was truly their property.

My assumption, that I am looking to confirm, is that once the property became REO, they would loose their claim if the tank actually was owned by the company. Or, at very least, they have a limited time to state and rectify such a claim. 4-5 years after we took ownership does not seem reasonable or legal to me.

Funny you mention the logo. Yes they put a fresh sticker on it a few years ago and I was wondering why. Now I am LOL in hindsight. I think I will try and find a nice sports car and put my sticker on it and tell the owner "see, its mine". 

Update:

-They are asking me to prove that they own it

-I am asking them to prove that they own it

Anyone know the operation of the law on this? 

Thank you in advance

Hello fellow BPers. Question for those who are familiar with rural properties that have propane service;

Who owns the propane tank when you purchase a REO property in California?

We bought the property about five years ago, now the supplier claims that they own the tank, and we therefore owe them tank rent. It is my assumption that, if the tank was still there when we purchased the property from the bank, it is now owned by us/goes with the property. 

Anyone experienced on how this law works?  Seems like they are trying to pull one over on us. They are currently demanding that we somehow prove that we own it....several years later.

Thanks in advance for sharing your experience/knowledge! 

HA! Just as I posted, IRS released this revised doc on the 199A Final Regulations. Here is the link for those that are interested:

https://www.irs.gov/pub/irs-drop/td-reg-107892-18-corrected.pdf

@Amit M.   It is possible that we are talking about the same thing but your description is not exactly accurate. This new law allows for a 20% deduction of Qualified Business Income when applicable, and has nothing to do with the actual tax rate. A lot of misconceptions are floating around out there and are being repeated. i always joke with my clients (but serious), "be careful who you listen to for tax advice". Ultimately, in this example, where we do not have a corporate business structure, your net income from the Schedule E rental activity will still be taxed at your personal tax rate whether you are eligible for the new 20% deduction or not. It will not necessarily be considered self-employment however.

Yes, your Schedule E can be considered to be pass-through for purposes of this deduction. You do not necessarily need a LLC or S-Corp, BUT remember that the rental activities need to be treated as a business to qualify. This is "business" determination is no longer a subjective or unclear statement now that the new IRS notice was sent out. Make sure you meet these guidelines.

I like your idea of not creating a LLC just for this purpose. Your additional accounting costs (CA568), and CA FTB costs ($800 min/yr) makes it hard to justify. If its not needed don't do it is what I would advise.

As always, I recommend that you consult your tax adviser for your exact situation to make sure that you in fact qualify, report correctly, and to help guide your current and future tax strategies. 

Yes, you can research with the IRS references online to verify your strategy is legal. Just keep in mind that they are behind schedule on posting a lot of updated material on their website due to the earlier shutdown. If you have a good accountant, he/she will be able to confirm these new laws for you as well. 

@Ben Freeburg

As far as reference, check out the actual IRS notice that was published (2019-7) as a starting point. Sometimes people misinterpret, so i like to go straight to the source first, then read the misc articles....

@Ben Freeburg

You do not need a LLC or other entity type. The Schedule E is perfectly fine for this purpose.

Property management is ok. You can count these hours towards the 250 surprisingly. So yes, you can manage the manager.

No need for a work around in my case. Pretty straight forward with the safe harbor. Very investor friendly in my opinion.

Just make sure that you keep seperate logs (required for 2019 and up) for residential and commercial. And stay away from NNN leases.

@Marcony Simoes, Yes-very happy the IRS finally put this out for clarification. In a nut shell; this is the best of both worlds. If you meet the Safe Harbor rules you clearly and easily get to treat your RE as a business for purposes of this new deduction, but not an actual business at the same time. You therefore do not put the property on a Schedule C (thus saving you on Self Employment taxes). The property gets to remain on a Schedule E and you get the new Qualified Business Income 20% deduction on the rents......of course "everyone's exact situation is different"..."consult your tax adviser".."this is not legal advice", yada yada, but that's a summary of the new law at the basic level. 

Feel free to PM if you have any specific questions.

Hey guys. We are converting our residence into a rental within a year. The house is in a great neighborhood (Sacramento region) and will therefore attract some better tenants.

The back yard is a mess and needs to be dealt with. The area is too big to do straight rock and I don't really like the idea of an actual grass yard. It's been rare for us to find tenants that actually take care of a yards regardless of location.  

What would you guys do for a B+ property with a blank slate of a lager back yard? I'm happy to spend some time and money on it, but will not break the bank since its going to be a rental.

Also, if you want to share any actual design ideas, cost, pics that worked for you that would be an awesome. 

Thanks in advance for any input!

Don't believe the prevailing wisdom "don't touch your retirement money to invest in real estate." that you are being told. Do whats right for your goals, needs, and experience. A stock broker with never tell us to withdraw funds from our account to buy real estate haha. Joking aside, using a SD IRA for real estate can be a great tool if done correctly. You will find lots of threads on BP for more research and references for sure. Here are a few tidbits that I learned from my experience;

1. If I would do it again, I would probably lean towards the "checkbook control" option that you are referencing. I have one without, so I have to instruct the custodian every time a payment needs to be made. Although not necessary in my case (not flipping or making lots of transactions with it), it would be helpful/more convenient. If flipping, I would consider it a must.

2. The custodian matters. Find a safe one that you trust, has fees are reasonable (will be much higher than your standard brokerage account), and has great support-you will need it. If you can find one that has a physical office near you, that would be a nice bonus. 

3. Be very careful that you follow the IRS rules. In a lot of cases you will naturally walk a fine line with the rules, especially with the checkbook control. The hardest one for me is the concept of not adding value to your deals (other than basic management). If you were to simply do a repair or something like that, the government could theoretically impose a distribution of your retirement account  and then you would have to pay the tax and possible penalties.

4. Know the "Why". And know that tax pros and cons for a SD IRA for your particular strategy.

Sounds like you are on the right path with your research.