All Forum Posts by: Doug Wilkes

@Ashish Acharya lol, this made my day...as you can tell I'm headed for big trouble if I don't get a plan in place.  Will call you the week of 9/19. 

Chris Seveney - thanks for sharing.  Do you hold the properties in the same C-Corp or refinance into another holding company or write a note from the C-Corp to another company for the home?  I've always heard getting the property out of a C-Corp is a pain, but if it's not it seems like the best way to keep funds in the business to fund growth.  Would you ever change the C-Corp election to an S-Corp election if the owners wanted to receive a payout? 

I can't imagine what we have is too uncommon.  Both investors own other non real estate businesses.  Currently, income is paid to my S-Corp and then I pay a W2 and dividend to myself.  I was hoping to increase cash flow to my current S-Corp then run those funds through the same payroll, 401k process I have in place. 

@Ashish Acharya - if this ventures into the realm of a consult feel free to reach out and we can set up a call. 

What if the strategy was flip, flip, BRRR? Using a flip LLC (C-Corp owned by two S-Corps) and a holding LLC (partnership owned by the same two S-Corps mentioned above).

C-Corp is only taxed at 21%, ownership can take a small amount of income per flip (paid as W2) leaving money in the business to grow a staff, buy software, etc. Then leverage the tax free BRRR money to buy more rentals or flips. When we refinance we do so into the holding company.

OR C-Corp pays nothing to the owners and uses the money to grow the business and the owners are paid out on BRRRs through the holding company partnership to their S-Corp? 

Basically, we need to figure out the tax game before we can really set the vision for the company which will then guide our actions.  Having the active income taxed so high really slows down the process, so an effective tax strategy to keep more money in the business is crucial to growth.  Our CPAs basically said pay the tax and flip more houses, which doesn't seem like the best approach.  

It will be 5 or more years before I can qualify for REPS, but my business partner should qualify next year. 

Can your c-corp qualify for real estate professional status?  

The company is owned by two S-Corps and taxed as partnership, S-Corps owned by entrepreneurs in other endeavors and can not qualify for Real Estate Professional Status.  We are in the 75 day window to change our status, have three flips going with a projected $100k profit (active income).  We would really like to buy a rental all cash with proceeds, but all the taxes on the active income is around 46% after fed, state, and self employment taxes. 

from IRS.gov:

Closely held corporations.

A closely held corporation can qualify as a real estate professional if more than 50% of the gross receipts for its tax year came from real property trades or businesses in which it materially participated.

TD bank 

@Joanna Golden I'm looking as well, so many questions.  This is the most recent one - https://www.biggerpockets.com/...

I purchased a primary residence in 2015.  In 2018 it was turned into a rental.  Depreciation has been $5300 a year since.  A quick test on DIY (thank you @Lee Ripma) shows a possible $9k deduction.

Can I use a cost segregation depreciation now even though it's been years since I purchased the property?  

Is this bonus depreciation to be used in conjunction with current depreciation (1/27.5)?

Thanks!