All Forum Posts by: Christian Block

 If your short term rental property qualifies as a business, you won't be able to offset that income with a loss on your passive long term rental property.

You can find more info on the special $25k rental loss allowance at the link below.  There is a low income threshold phase-out, however, so this may not work for you.

https://www.irs.gov/publications/p925#en_US_2022_publink1000...

First, sorry if this has been discussed already, but I thought this would be a good time to provide some cautioning on the Beneficial Ownership Information (BOI) reporting, as required by the Corporate Transparency Act, effective 1/1/2024. Every person who owns or manages an LLC should be aware of this.

I won't rehash all of the specifics (I will link the Small Entity Compliance guide below) but this probably affects most rental real estate investors who own their property in an LLC. If your reporting company was established before 1/1/2024, you have until 1/1/2025 to file your BOI report. And if your reporting company was established after 1/1/2024 and before 1/1/2025, you have 90 calendar days after receiving notice of your company's creation to file your report.

Also of note, if you not already applied for an EIN, I think you want to do that now, or sometime before filing your BOI report.

https://www.fincen.gov/sites/default/files/shared/BOI_Small_...

One other thing to consider is creating a larger loss with expensing the repairs probably doesn't create a tax benefit if you don't have 1) other passive income  2) you aren't a real estate professional or 3) you phase out of the special $25k real estate loss allowance.

Short answer, no.  I'd suspect that will be taxable in the country were the retirement account is located.  As for US income tax, there may be tax treaty benefits and/or the application of the foreign tax credit.

I think the first thing you want to check is Section 121 gain exclusion eligibility.  Go through the five part test to see if you meet the requirements.  This should give you a good idea of the amount of gain (if any) you will realize.

https://www.irs.gov/publications/p523

 I agree, just didn't articulate that well.  Thanks for the correction.

 There is a lot to unpack here.  Lets start with the repair expenses.  Certain repairs can be expensed, but only if the property is placed in service, which, in rental real estate, is typically when the property is finished and placed on the market.  If these repairs where completed to get the house ready to rent prior to listing, they probably need to be capitalized and depreciated.

Where you report the activity will depend on the type of rental.  Are you providing substantial services (such as a bed and breakfast)?  Or does it qualify as a short term rental?  Then you probably need to report on Schedule C.  If not, the activity will likely need to be reported on Schedule E.

The cost basis of the property will be your initial purchase price, plus any improvements you've made prior to turning it into a rental.  And then possibly the repairs add to this, depending on my first point above.

If possible, try requesting a W9 from your contractor so you can determine if you need to send them a 1099.

Agree with the above, you would first want to look at the partnership agreement. If it is a two member partnership, and one partner assumes all of the ownership, the LLC would continue to operate a disregarded entity. If the LLC owner is an eligible S Corporation shareholder, then yes, you can probably make an election to be taxed as an S Corporation.

Partnerships are complicated, and you would want to seek advice from a CPA well versed in partnership taxation.  And since this is a real estate forum, you should be cautious and know the ramifications of contributing real property to a corporation.
 

It sounds like it's possible the business hasn't started yet, short of registering the LLC. Identifying start dates is often a point of litigation between taxpayers and the IRS. Generally, the start date is the point when the business begins functioning as a going concern and conducts business for which it was designed. If you are building a house on the lot to start a residential rental real estate business, your business might not start until the house is placed in service.

Also, you want to be careful deducting auto expenses, and certainly want to keep a log to track your business mileage.

I should have specified that CPA’s who regularly work with or specialize in rental real estate should be familiar with preparing a change in accounting method. Especially if they have been around since the tangible property regs came out.