All Forum Posts by: Louis Alvarez

Ed,

I'll throw my "off the top of my head" two cents into the thread, but you are NOT going to like my answer. 

My comments are obviously based on my understanding of the facts provided and I'm going to make an assumption or two related to the tools & phone system so if those assumptions are incorrect then the answer could change. ( insert legal disclaimer here as I'm not giving you tax advice, Yada, yada, etc.)

Since everything is in SMLLCs (and they are all disregarded for tax purposes) you:

A. Own three rental properties 

B. Have an undisclosed business which presumably generates income and expenses and is unrelated to your real estate, and

C. You own some assets (tools, a phone system, etc) that you use to support your rental properties.  This is the part that is fuzzy on the facts.  You refer to this as a "business" in your facts but nothing in the facts provided supports that this is a business.  Simply having assets in an SMLLC does not necessarily create a business. Again, if I'm wrong on the facts then my comments may change.

If my assumptions on the facts are correct, then you have:

A. Three Sch. E properties 

B. A Sch. C business 

C. (This is what you are not going to like) Most likely these costs are Investment Expenses reportable on Sch. A and subject to the 2% limit. This is a crappy (pardon the technical tax jargon) answer.

A more aggressive alternative/position to Answer C would be this. IF you initially bought the tool specifically for fixing one of the properties then I would either add it to the cost of that property or expense it if appropriate to that property when the tool is purchased. 

The fact that the tools are owned by a different SMLLC is moot for income tax purposes. In your scenario I would liken the tools and phone to someone buying a computer and a Morningstar subscription to help track their investments and improve the return on their stocks.  Those would be investment expenses on Sch. A (even if you bought the computer and the subscription through an SMLLC). 

Regards,

Louis

I have a friend that is a real estate attorney in St.Pete. PM me if you want his contact information. 

If you still need an attorney recommendation I have one in St.Pete I can recommend. Just PM me. 

Generally speaking an LLC electing S status does not have an income tax liability or a filing requirement in FL. The only time it would have to file in FL would be if it (the S corp itself) owed Federal income tax at the entity level. This typically relates to entities with built in gains that were formerly C corps. Your tax advisor should be able to tell you fairly easily if it applies to you. It typically does not apply to 99.99% of entities.

Welcome to BP.  There is a lot of great information on the forum.

Welcome to BP Eric.  Lots of good information and connections to be had here on BP. 

Welcome to Tampa and BP. 

Have you been actively trying to rent the property (i.e. it has been listed somewhere for rent?)

If it was always your intent to hold this property as an investment and rent it, then you would have a position to take that the gain on the property is a capital gain (subject to lower tax rates) instead of ordinary income (which can be taxed at a higher rate.)  It would really depend on all the facts and circumstances.  I would suggest you sit down with your CPA, lay out the facts and get their input.  

If it sold for $310 and you have $275 in it then your gain would only be $35K (less any closing costs) so a 1031 exchange would likely not be worth it.

Tom, If you still need someone PM me.

Welcome to BP!