All Forum Posts by: Eddie L.

@Jerry W.

I like the write up in below link. The most straightforward approach is probably the first one mentioned "Achieving Step-up in Basis upon a Shareholder's Death Through Liquidation". In this case, the heir(s) receive a step up in basis of the S Corp stock received. Afterwards they can fully liquidate the S Corp. Upon liquidation, the properties are treated as if they were sold to the shareholders at Fair Market Value ("FMV") so the S Corp recognizes a gain of X. At the same time, this gain would increase the shareholders' basis in the S Corp stock so the shareholders would recognize a loss of X since the FMV of the properties received is now less than the stock basis by X. The two net to zero.

Liquidation in this example, I would think can be done via legal liquidation or just a entity classification change from S Corp to Partnership to trigger a deemed liquidation. Example can get more complicated if there are any other assets/liabilities other than rental property of course.

https://www.americanbar.org/gr....

@Dave Foster

Thanks for the correction. With the unrecaptured sec 1250 gain of ~$44k @ 25% tax rate, would result in an additional ~$11k of taxes.

Assumptions:

1. Taxpayer did not depreciation property.

2. All 3 units were rented out to others.

3. There were no improvements and other miscellaneous closing costs.

4. Triplex was not used and depreciated as part of their business.

5. Sale happened in 2021.

6. Total taxable income for taxpayer married filing jointly is between $80,800 and $501,600.

$500k Sale Price - $200K Adjusted Basis = $300k Taxable Long Term Capital Gain x 15% Capital Gain Tax Rate = $45,000 Federal Tax

Not sure how to pull you into another post but there's an interesting question on offsetting capital gain from syndication disposal against new passive activity loss in the same year. Thoughts?

https://www.biggerpockets.com/...

*Full disclosure not a CPA*

Certain conditions need to be met but offsetting your capital gain from the disposition of your interest against passive activity losses seem plausible.

Pg 79/154 from IRS Audit Guide:
"Passive losses are generally deductible only to the extent of passive income. However, current and suspended losses are fully deductible if there is a “qualifying disposition.” Under IRC § 469(g), a “qualifying disposition” requires three criteria:
1. Disposition of an entire interest (or substantially all[1])
2. In a fully taxable event (where all gain/loss is realized and recognized).
3. To an unrelated party.
If these three tests are met, losses are fully deductible against non-passive income (unless the taxpayer has basis limitations). Thus, in the year of disposition, losses allocable to the passive activity may offset portfolio and other investment income or may become part of a net operating loss. We have no regulations governing dispositions. Thus, we must look to IRC § 469(g) and legislative history[2] for guidance."

Pg 85/154 from IRS Audit Guide: "Reg. § 1.469-2T(c)(2)(i)(A)(2): Gain on disposition generally is passive income if the activity was a passive activity in the year of disposition"

Pg 84/154 from IRS Audit Guide: "Gain on Form 4797 and Schedule D should first offset losses from the same activity. If any gain remains, it offsets losses from other unrelated passive activities."

References

1. IRC 469(g) - Dispositions of entire interest in passive activity 

https://www.law.cornell.edu/us...

2. Internal Revenue Service Passive Activity Loss Audit Technique Guide - Chapter 5 Dispositions - Page 79/154

https://www.irs.gov/pub/irs-ms...

Based on what I hear from YouTube (not a primary source understand), if you quitclaim it into a land trust assuming your state recognizes land trusts this won't trigger the due on sale. Trust beneficiary can be assigned to the LLC. Anyone else heard of this?

@Wendy Jiang

Full disclosure I have no real estate experience yet, hopefully soon. Albeit I do agree with Scott on asking for a list so that everyone's on the same page. There's also the concern that they're taking one item at a time for just testing the waters. Also as they're taking bigger items like washer dryers are you concerned that they may damage the property of the movers are dragging them out. I guess that's what the security deposit is for.

Thank you both for the concern. The numbers I gave were for example purposes to make sure I crossed the $5k mark. Albeit realistically not too far off either. Currently speaking with Anderson Business Advisors on structure setup for first rental. I'm concerned that setting up a DIY asset protection structure might end up coming back at me one day when I realize I screwed up somewhere in the documents or process and it's too late. At the same don't want to spend too much on this given that I don't have much assets to even protect in the beginning. 

@Mike Davis

Thanks for the reply! Considering between ipostal1 and traveling mailbox atm. I think both are sufficient, but has pros and cons

@Mike Davis Can you use ipostal1 to register for an EIN?