All Forum Posts by: Geoffrey O'Brian

Hey all.
I'm in California and am contributing my property to an LLC. Single member at first (me), then multi-member. There's a managing member who is the developer. We plan to build on my lot and my neighbor's lot.
The developer started an escrow to contribute my property and to leverage it to get a bridge loan to buy my neighbor's property. That was okay with me, but now escrow is telling me the "sale" of my property to the LLC will produce a 1099 to the IRS, showing the current market value. Developer says that can be "backed out of my taxes," which may be the case, but I still think I should try to avoid a 1099, right?  Or is it inevitable if I contribute my property to the LLC?
How do I contribute an encumbered property ($340K loan) to the LLC, let the LLC pay off my loan, but not trigger a 1099?
Thanks,
Geoff

Hi @Tony Kim -- thank you! Yes, that calculation reveals the correct basis of the property I received. Two questions:

1) when I determine the deferred gain, do I use the full purchase price of the property I relinquished (the "cost") to determine the adjusted basis of the property I gave up? Or do I also reduce that number by the land/business ratio? I assume I do NOT reduce that number and use the full "cost" (purchase price + costs) if I am going to apply the ratio later.

2) Do I determine the land vs. improvements ratio based on the original purchase (price + costs)?

Thanks!

Thanks, @Dave Foster! 100% correct, I am looking at form 824 which transfers the basis of the old property into the new property and resets basis and depreciation schedules.

Okay, so how do I factor in land vs. building in these calculations?

1) ONLY in the Adjusted Basis of Property given up (by interpreting "purchase price & cost" as only portion that is the building) (moving down from approximately $550,000 to $250,000 for just building, in my case), which will also lower the...

2) Depreciation Basis of property acquired (that transfer old property into new) by applying the modifiedAdjusted Basis of Property given up (modified to focus just on building "cost"). Or do I also address land vs. building in the "Gain recognized on property?" -- actually, scratch that, the gain recognized is $0, right since I did a true 1031 exchange that resulted in no capital gain?

Thanks @Rex T.  To clarify, I already completed the 1031 exchange...now I am just determining the depreciation basis in the property I received. Thanks! 

Hi smart people,

I have a tax-related question about figuring depreciation basis on a new property received in a like-kind 1031 exchange of rental properties (3-unit for 8-unit). I live, and the buildings are in, Los Angeles, CA where land value constitute a hefty portion of the fair market value, which leads me to my question...

Is value of land vs. building a factor in determining depreciation in property received in a 1031 exchange? If so, how do I factor in? I ask because land vs. building is not mentioned in the calculations for both Adjusted Cost of Property given up and Basis for Depreciation in property acquired (see calculations below).

Calculations for each:

1) ADJUSTED COST BASIS OF PROPERTY GIVEN UP:

Purchase price & costs

+ Improvements to Building

- Depreciation taken.

= Adjusted Basis (Note specific use of Purchase Price & costs, not building cost).

2) BASIS FOR DEPRECIATION OF PROPERTY RECEIVED:

Relinquished property adjusted basis + Any additional Property transferred

- Liabilities assumed by taxpayer (new mortgage)

+ Gain recognized on property

- Liabilities assumed by other party (old mortgage)

= Basis in replacement property  (again, no mention of building vs. land)

Thanks for any light you can shine on this!

Geoff

@nabil suleiman 

Thank you, that would be very helpful.

Hi All,

I learn so much from the people on this forum, so thank you in advance for that!

I am looking for a property manager/company for a large 8-unit building in Tolucca Lake (near North Hollywood). Chase is requiring property management for my loan and I am also at a point where I need the help since I have a full-time job, 13 other doors that I am personally managing and a 3-year old toddler!).

I am very hands-on, so it is hard for me to go property management, but I need it. I think what I am looking for is: 1) low fees and 2) experience 3) cost-effective with service calls.

So far, I have spoke to Harlow and Denca, leaning toward the former, but would love more suggestions!

Thanks,
Geoff

Greetings all,

Now that the Costa-Hawkins repeal has actually qualified to be an initiative on the November ballot, what is the concensus on whether this stands a chance of passing?

I own units in LA and am in the midst of selling a property and trying to leverage up with a 1031 exchange, but I am finding prices sky high and cap rates very low... making me fear the potential of buying now and then losing value if Costa-Hawkins is repealed.

Thanks,
Geoff