All Forum Posts by: Tom Walrod

Thank you. I hadn't considered that depreciation recapture tax needed to be paid at time of our sale.On the good side, we've had the place since 1995 and it's value has tripled, so I imagine the recapture tax that would need to be paid at time of sale would be less than a third of the amount due if we paid the entire capital gains tax + depreciation recapture. 

A sale would mean our buyer could re-sell at any time, which means we would run the risk of having to pay the capital gains tax at an unexpected time. Need to think about whether we would want the interest only/contract considered fulfilled on our deaths to be assumable.  Our buyer is someone we would like to have the property on our deaths anyway so we aren't concerned about him paying off the property to our estate.

We want to do right by our property manager and ourselves. We own a multi free and clear and want to get it into his hands, but also want some income till we die. If we sold the multi to him for no money down and 5% interest only payments, with the principal due if or when he sells the property, and the contract extinguished on the death of the last person in this couple would we owe the tax man anything other than the tax on the interest we received? The buyer could make principal payments if he chose, and we would owe tax on that, but he would not be obligated to make such payment unless he sold the property - and of course we would owe capital gains if we were paid off. But if we don't get any principal payments wouldn't we only owe tax on the interest we received? Can a contract for sale be written that extinguishes a debt to a seller at the seller's demise?

We want him to have control and ownership of the property; he has virtually no down payment, paying us 5% replaces much of our lost rental income but leaves him a fair amount and the ability to benefit from rent increase and appreciation. If this is a horrible idea can anyone suggest something better? We are divesting of 33 units, the multi we want him to have is 8 units. Just read about something called a Collateralized Installment Sale Agreement or C453 installment sale, which puts off capital gains taxes for 30 years - past the time I plan to be here. 

Logan, Went hunting and the webcast i listened to is actually the one from 1/11/18. I misremembered the date.

http://www.marcusmillichap.com/about-us/news-event...

As I recall, the statements that most clearly indicated the need for an LLC to gain the favorable tax treatment were around minute 51-54 or so. I do note that they have a newer report dated 4/18, but haven't listened to it yet. It is very likely that I have used incorrect terminology and it's not my intent to put my errors on M&M. Am trying to pin down an understanding of the requirements as soon as possible. I appreciate getting consensus from a focused group.

Yeah, the LLC wrinkle is what I'm really curious about. A Marcus and Millichamp roundtable at the end of 2017 made a pretty distinct cut between real estate LLC and K-1 tax form filing vs private landlord with a Schedule E as far as the 20% pass through eligibility was concerned. Obviously I'm hoping I misunderstood or there is new IRS direction in place that will allow me to take advantage of the pass through. I am managing to keep income below $157,500.

Is there any new IRS direction that would indicate that a landlord who owns and manages his own apartments and does NOT have them in an Llc will be able to use the 20% pass through deduction? I Just report income on line 17 of the 1040 and attach schedule Es for each place.