All Forum Posts by: Eddie L.

This BP article may be helpful as well.

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

Technically, it is possible to carry out a partial 1031 exchange and purchase something of lower value, but taxes will have to be paid on the difference. For example, if the relinquished property is being sold for $1 million and the investor purchases a new property through the 1031 exchange for $900,000, they will need to pay the normal capital gains taxes on the $100,000 difference. This extra $100,000 is known as “boot.”

Don't follow the example exactly. You sold a property with an adjusted basis of $250k for $450k. You have $450k of cash now. You can either full 1031 exchange the $450k or you can 1031 exchange a part of it. How much are you looking to partial? What does "convert back into a future buyer mean?

***Not a CPA and no filing tax return experience for others***

1. Under IRC §121(b)(2)(B), if you alone meet the ownership and use requirements for your primary residence at the time of sale then you'll be entitled to an exclusion of $250,000 gain. 

2. If you used a portion of your primary residence as a rental, then your exclusion would be smaller of course.

https://www.irs.gov/publicatio...

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

Why would paying cash mean no 1099? lol

***Not a CPA and no filing tax return experience for others***

Pass through entities such as a single member LLC are typically disregarded for tax purposes. This just means that the IRS treats it as nonexistent and everything it owns is really owned by the taxpayer directly. From a tax standpoint, I don't think it matters. From an asset protection standpoint, you'd want a clear separation of entities being yourself and the LLC so yes it would be beneficial to have all business matters going through the LLC in general. Also I assume you're referring to the IRC §199A/Qualified Business Income Deduction. LLC isn't the only pass through entity that qualifies. Sole proprietorship would qualify just as well and you would've saved on the cost of setting up and maintaining the LLC.

https://www.law.cornell.edu/us... 

***Not a CPA and no filing tax return experience for others***
I'm leaning on no. "Any day that you spend working substantially full time repairing and maintaining (not improving) your property isn’t counted as a day of personal use." This is your reference in the IRS Publication 527 which is also in line with IRC §280A(d)(2) language noted below as well. Unfortunately doesn't seem like regulations have been issued to further support this but the intent seems to be there. As Dave noted the safe harbor in IRS Rev. Proc. 2008-16 goes over what a qualified property for 1031 is. If the concern is just your repair & maintenance days counting towards your personal use day quota, then these should help put your mind at ease.


IRS Rev. Proc. 2008-16 (From Dave's response)

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

(1) Relinquished property. A dwelling unit that a taxpayer intends to be relinquished property in a § 1031 exchange qualifies as property held for productive use in a trade or business or for investment if:
   (a) The dwelling unit is owned by the taxpayer for at least 24 months immediately before the exchange (the “qualifying use period”); and
   (b) Within the qualifying use period, in each of the two 12-month periods immediately preceding the exchange,
         (i) The taxpayer rents the dwelling unit to another person or persons at a fair
         rental for 14 days or more, and
         (ii) The period of the taxpayer’s personal use of the dwelling unit does not exceed the greater of 14 days or 10 percent of the number of days during the          12-month period that the dwelling unit is rented at a fair rental.

.03 Personal use. For purposes of this revenue procedure, personal use of a dwelling unit occurs on any day on which a taxpayer is deemed to have used the dwelling unit for personal purposes under § 280A(d)(2) (taking into account § 280A(d)(3) but not § 280A(d)(4)).

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

"The Secretary shall prescribe regulations with respect to the circumstances under which use of the unit for repairs and annual maintenance will not constitute personal use under this paragraph, except that if the taxpayer is engaged in repair and maintenance on a substantially full time basis for any day, such authority shall not allow the Secretary to treat a dwelling unit as being used for personal use by the taxpayer on such day merely because other individuals who are on the premises on such day are not so engaged."

***Not a CPA and no filing tax return experience for others***

Intention seems hard to prove out... IRC §469(c)(1) defines passive activity as any activity which involves the conduct of any trade or business, and in which the taxpayer does not materially participate. The thing is I wouldn't consider holding raw land in anticipation of building rental property on it would be considered a trade or business. The land was not used in any way for profit such as advertising to others as a lease opportunity. Still cap gain though 

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

No real estate experience but I am curious about this as well. If I had to guess I would think this is standard given the PM company is acting on your behalf as your agent. Almost like you own a company and your employee while on the job does something wrong to the client and the client sues the company not the employee. I'm just guessing here. Of course there is a line being "willful misconduct and/or gross negligence" of the PM company.

***Not a CPA and no filing tax return experience for others***

Curious what changed exactly. Generally speaking, improvements to property are depreciated over its asset life determined by the IRS. It's not that you can't deduct them. It's just that you deduct/depreciate them over a period of time which I think relatively makes sense since you spent money on an asset which has "wear and tear" over time. It's not like an operating expense like paying a property management company fees for that month's of work that is a thing in the past now.

 What's the source of the $15k jump? Is this from RtR?