All Forum Posts by: Brandon Hall

@Darren Sager I agree man! I don't make the rules though. IRS thinks they are 27.5 year property. 

@Lesley Resnick no you cannot split it out, that's what the anti-abuse rule protects against. 

@John Buchanan the HVAC system is looked at in the aggregate. Thus, I'd capitalize the HVAC work. Additionally, the windows improve the Building UOP (Unit of Property). Because you are replacing what seems to be most (or all) of the windows, I'd consider it a material improvement to the Building UOP and, as a result, the anti-abuse rule applies for the DMSH and you have to look at the cost in the aggregate. Thus, I'd capitalize the cost of the windows and depreciate over 27.5 years. 

If you were replacing just a few windows, I may be inclined to take a different stance depending on your facts and circumstances. 

@Account Closed I haven't taken the course or paid for their services but we have current clients who have in the past. I can't comment on the content, but if you don't feel good about the purchase, then request a refund and buy Amanda's book. Or just read blogs. There's so much free and useful information out there that you can find if you don't mind spending time doing some digging. 

The problem with these types of products is that they are not TAILORED to you. When building a tax or wealth plan, you absolutely need it to be tailored to you.

I can tell you all about being a real estate professional for tax purposes and I can charge you $1,500 to do so. But does it provide any value at all to you? Can you even qualify? You are more knowledgeable, sure, but can you use the knowledge now or in the future?

Additionally, be wary of CPA firms, businesses, attorneys, wealth planners, etc who will take on any client who walks through the front door. Once our firm identified our target client, we turned everyone else away (for tax planning, prep, and accounting), and as a result we focused only on the clients we knew we could consistently add significant value to. It's hard to turn away clients and we didn't do it for a long time, but once we did, our client service significantly increased and our clients are walking away with a lot more value. 

We have considered rolling out group courses such as the one described here, but one question we can't answer is "how will we provide value to everyone in the room?" These group courses are an excellent way for ME to scale MY business and earn more money. It's not necessarily an excellent way for YOU to scale YOUR business and SAVE more money because the content may not apply to you at all. 

It does sound like there is a mastermind element to this. I'm not sure what the live group calls look like but those could be valuable for you depending on how the calls are structured. If it's just a lecture, I wouldn't waste time with it. 

Anyway, point is, if I spent that type of money, I'd want someone looking specifically at my situation and saying "you need to do X by Y date." 

@Lesley Resnick yes, if each component is under $2,500 and does not violate the anti-abuse rule in Regs. Sec. 1.263(a)-1(f)(6), then you could deduct the cost via the De Minimus Safe Harbor. 

Most likely, the HVAC (materials and labor) exceeds $2,500. Windows may be a different story depending on how many were purchased and the total cost. 

Windows and HVAC are not components with useful lives of less than 20 years. Therefore they do not qualify for bonus depreciation.

+1 for 100% bonus depreciation. 

@Joe Brummitt great question and glad you found an accountant and attorney.

If syndicating a buy and hold property, we generally recommend sticking to LLCs. Others have highlighted asset protection and the fact that LLCs won’t help too with your tax position, which is true for the most part.

What others haven’t mentioned is scale.

A MMLLC (MM = Multi-Member) will cost you significantly more than a SMLLC (Single Member) to maintain. For example, MMLLCs will generally run $1,200+ in tax prep costs whereas a SMLLC does not file a separate tax return and thus avoids tax prep costs (for the most part).

To scale an entity structure without incurring high costs, you and your partner may form a MMLLC that then takes 100% ownership stakes in subsidiary SMLLCs that own the properties (assuming you aren’t syndicating).

Or you may start a real estate fund that is a MMLLC with various share classifications. That MMLLC would then open up a SMLLC for each new project it takes on but it would own 100% of each SMLLC.

When you syndicate deals, the entity holding the asset will generally be a MMLLC. However I highly recommend that you own your GP stake through a separate MMLLC owners by you and your partner (versus owning your GP stake in your personal name). Doing so will allow your MMLLC to take many GP stakes across all of your projects but have all profits/losses flow through one entity = your MMLLC with you’re partner. This consolidation of profits flowing through one entity will allow you to utilize many tax strategies that may not have been otherwise available.

Again, keep scale in mind when you talk to your professionals.

As previous posters mentioned, it won’t work the way you are hoping it will.

But you should absolutely explore liquidating and investing the gain proceeds into an opportunity fund (new for 2018). Best tax break in decades.

@Nick Colvill over half of our clients qualify as an RE pro and most of them are from BP. Generally can't have a full-time job and must work 750 hours and greater than half your time in a real estate activity. 

You then have to demonstrate that you materially participated in your real estate activity in order to actually deduct the passive losses. Many people forget about that. 

Hardest part about qualifying? Tracking your time. This lady, who owned 8 units, learned the hard way: https://www.ustaxcourt.gov/UstcInOp/OpinionViewer.aspx?ID=11587

@Kevin Korntved it's still new and there is a lot of uncertainty as we await regs on O-zones. That said, many of our clients are hyped about it. The ability to roll only your cap gains into the fund (and receive your basis back) makes these funds extremely appealing for investors. Even more so once you factor in the massive tax breaks you stand to receive. 

Imagine receiving a 15% IRR for 10 years tax-free. That's huge!

Tagging my colleague @Thomas Castelli . He has quickly become our firm's O-zone expert so hoping he can chime in. 

Yes, landlords who have rental activities that rise to the level of trade or business need to file 1099s.