All Forum Posts by: Bruce D. Kowal

Quote from @Kyle Nigro:

Hi everyone,

This year I purchased my 2nd and 3rd rental properties in the STL area. I had a SFH in the area already, which is under an LLC. I have not created an LLC for the other two properties.

I have been collecting the rent from all my properties and putting it in the LLC account. Is this ok? Should I make a 2nd and 3rd LLC? Or should I put all the properties under the same LLC?

Not sure if there are any disadvantages or concerns I should have about doing this.

Thanks,

Kyle

These are really legal questions as they ultimately deal with liability and the protection afforded by LLC's. I see that you are in NY State. Now, NY has crazy requirements for LLC's, such as the requirement to post a notice in a newspaper when the LLC is formed. Many people ignore this. But if you don't, you lose access and protection of the Courts.

I'm next door, in Bayonne.  Curious to see what kind of response you will get.  Building Dept notorious for being unfriendly, unless they know you.

Quote from @Dave Foster:

@Eddie L., It does not matter if @Nat Serrano took depreciation or not.  depreciation recapture is on all depreciation you did take or could have taken.  

@Bruce D. Kowal, Maybe there's something new down the pike you're referring to.  But un-recaptured 1250 depreciation as far as I know has always been recaptured at ordinary income rate up to a 25% maximum.

And of course don't forget that you may be subject to state tax and possible surcharge for the Affordable Care Act.

If you go the 1031 route there of course  is no tax.  All indefinitely deferred tax including gain and depreciation recapture  is used to purchase more investment property 

 It can be confusing.  Here's an article about it.  I take no credit for writing clearly about this.  I tried to simplify it, and made a mess of it.

Thank Goodness for computers . . .

the amount of depreciation claimed on Sec 1250 property that is not recaptured as ordinary income under the Sec1250 recapture rules is unrecaptured section 1250 gain, and is subject to a special capital gain tax rate of 25%

Recaptured and Unrecaptured Real Estate Rental Section 1250 GaRecaptured and Unrecaptured Real Estate Rental Section 1250 Ga

Quote from @Wayne Brooks:

Quote from @Bruce D. Kowal:

The depreciation recapture rules only apply if you took accelerated depreciation.  If someone does this a lot, you may want to choose straight-line depreciation, and avoid messing with recapture. This is termed §1250 gain.  Initially you will get greater losses from accelerated, to be sure.  Upon recapture, some of that benefit will be taken away.  Maybe somewhere, someone has modeled this, with and without.  Just something else to mess with your head!

Say who, what?  Upon a sale(without doing a 1031), you have to recapture All depreciation taken, period.

I apologize for being misleading.   All depreciation is recaptured.  But if you take straight line depreciation it is treated as Capital Gains, and taxed at more favorable capital gains rates.  If you took accelerated depreciation, then the recapture is taxed as Ordinary Income. 

Humor:  get a job as a Port Authority cop.  Or ticket-taker on the LIRR. . . .With those jobs, you will be able to move out, and save money for real estate investing.  Don't put the cart before the horse!

The depreciation recapture rules only apply if you took accelerated depreciation.  If someone does this a lot, you may want to choose straight-line depreciation, and avoid messing with recapture. This is termed §1250 gain.  Initially you will get greater losses from accelerated, to be sure.  Upon recapture, some of that benefit will be taken away.  Maybe somewhere, someone has modeled this, with and without.  Just something else to mess with your head!

Go to California State Society of CPA's website.  They will give you referrals of competent CPA's who are well versed in real estate.

There is a Special Allowance of $25,000 for losses from a rental activity for someone in your situation.  That means that losses up to $25,000 are allowed to offset your W2 income - - but you can't make too much money!  The loss is completely phased out when your Modified Adjusted Gross Income is > $150,000.  All is not lost, however.  Whatever your losses may be, they are "suspended" [A Magic Trick]. They are called "disallowed losses" and are carried forward to future years.  When you finally sell the property, you can then, at that time, deduct those losses.

These are the Passive Loss rules, which Congress set up to curb some pretty wild "abuses".  You need professional help with this.  Don't try it yourself using T*rb* T*x unless you have an idea what the outcome should look like.

I have an office in a Co-working space in New Bedford.  Groundworks.  The City definitely seems poised for take-off.  Not sure about Fairhaven, yet.

Go the website for your State Society of CPA's.  They will give you referrals.