All Forum Posts by: David C.

I have been watching several of Mark Kohler's videos on Youtube regarding tax strategies and planning, and came across something that made me scratch my head. In his diagrams, he considered all rental properties as passive income, and had noted that profits (if any) from this passive income are not able to be utilized to fund a solo 401k or a self directed IRA.

That being said, if you are the property manager, couldn't you consider yourself a real estate professional and run these profits through a separate S-Corp (or an LLC taxed as an S-Corp) and then draw off a W-2 / and a K1 and then shuttle these proceeds over to a solo 401k ?

Thanks in advance,

Dave 

For those who use a property manager (particularly for out of state rentals), do you have to have them listed as an employee of your Single member LLC, or can you consider this as an expense(not an employee) to the LLC ?

I unfortunately live in a State that charges a 2% transfer tax for any title change (even between "sister LLCs").  I have been looking at a Land Trust as a way to avoid this.  Has anyone used it successfully for this purpose, and has anyone done so in PA?

I have been looking opening a SDIRA.  I have read/heard many tout the overall benefits and flexibility of using an SDIRA, but when I looked into it a little more, the SDIRA seemed to lose its luster with several restrictions and underlying fees by custodians.

#1) Restrictions - Cannot "self deal" as this is a conflict of interest - This seemed couter-intuitive to me.  Isn't a retirement all about serving yourself later in life?  This then limits all business activity(other than the initial investment) to be with outside of your own control (i.e. you have no direct control over the investment itself).  That is a bit worrysome - if you are not careful, you could get taken for a ride by a less-than scrupulous business entity/individual.  I have read some horror stories of this (Google SDIRA scams, there are many).  That being said, I realize anyone can get scammed, if not careful.

#2) Fees - While fees are typically not huge, they do add up over time, and even a 1% fee over the life of an IRA can drastically chew up potential returns.

#3) Having faith in your custodial service.  There was a prior post on BP that referred to a litigation case involving a Trust company where the end result was the sentencing of two individuals with fraud, and millions of dollars of SDIRA dollars lost.  That's scary!

So:

For those who have used SDIRAs(or those who avoid them), please comment, as this is an investment that is both intriguing and perhaps mine laden (if not very careful), from what I see.

Thanks,

Dave

@David M. Crystal clear. I actually understood your model initially. But my question still remains, "Does this cause a legal issue where Mgt LLC, LLC1 and LLC2 would be all seen as one entity by this transaction ?"

Just because LLC1 is funneling its proceeds through the parent (Mgt LLC in your example) and over to LLC2, I am not convinced that this would not default the LLC protection due to "co-mingling". IMHO, it would be very easy for a prosecutor to connect the dots and "pierce the corporate veil". It is my understanding that since the funds originated from LLC1, even despite passing through Mgt LLC and over to LLC2, it would be viewed legally as co-mingling proceeds from one LLC into another, thus one entity.  Is this true or not ?

If you (or anyone else) can provide documentation to support this one way or the other, I would be grateful.  Thanks!

I apologize in advance for the grammatical error in the title.  After revamping the title, I could not change it. It should have read "How have you found YOUR "rockstar CPA"..... 

To the question at hand

I have read several posts looking for a "rockstar" CPA.  Some touted using out of state CPAs, while others recommended local CPAs for a myriad of reasons.

The most common reason I have seen folks looking for this elusive rockstar CPA seems to boil down to a basic theme:  "I need a CPA who knows Real Estate Investing and knows Tax law to maximize my tax savings".  

And this is a very valid point - In my area I seem to find listings for Tax lawyers, and listings for CPAs, but not a CPA who is well versed in Real Estate Investing/Real Estate Tax Law.

Can others share their own experiences in their acquisition of their Rockstar CPA ?  Simply Googling/"Checking the Yellowpages", hasn't yielded me much.  Thanks!

@Julie Sisnroy, I am not a lawyer either, so take this for what it's worth - don't treat it as professional advice, but here is my personal experience/understanding.

For starters, from what you posted, it does not appear that you have set up any LLCs yet, so there isn't anything to "transfer" under a holding company yet. If I understand correctly, you are looking to create a holding company in WY with child LLCs in each state that you own your properties. Although not expressed above, I am making the assumption that you currently own these properties under your own name, and not an LLC at present.

If this is the case, I would set up your Holding company LLC *first* (which would be owned by you). Then set up the child LLCs as member managed LLCs with the listed member being the name of your WY holding company LLC. Then you would then need to transfer the title of your properties from your own name to each respective child LLC. You can use a title company for the title change and/or a lawyer. Keep in mind, some states will charge a transfer tax when you change the title over (which can get a bit pricey).

While I'm a big proponent of cutting out excess fees for things I can do myself(i.e. setting up LLCs), however, in this situation, I would consider using a lawyer to make sure this is set up correctly.

There is a good YouTube video of the overall structure which you are describing by Clint Coons using a holding company with child LLCs.  

I hope this helps.

He wouldn’t if he is SMLLC."

@Ashish Acharya

@Ashish Acharya, Why is that? It is my understanding that for any LLC (Single Member disregarded, or otherwise), you would want its own separate bank account(thus it would need its own EIN) for business/accounting purposes.

Otherwise, what EIN would you use? If you used your own personal money(your EIN would be your SS#) for operations of the LLC, this would be seen as "co-mingling" personal money within the LLC. This would nullify the protection of the LLC as it would be seen as an extension of the personal owner legally. I would imagine in this scenario it would be very easy to "pierce the corporate veil". Perhaps I am missing something here ?

@David M. I agree with you about avoidance of co-mingling. You can get in hot water that way legally as all LLCs could be argued to be operating as a single entity and thus pierce the corporate veil. However, it is my understanding that funneling funds from one child LLC to another as you suggest (even under the umbrella of a parent holding company) would still be seen as co-mingling. Could either you (or another expert) comment on this ?

@Ashish Acharya, If he wants to have a bank account/checking account for his LLC, he would need an EIN.