All Forum Posts by: Jason Watson

Quote from @Katie Balatbat:

@Shannon Garst

California is generally more cumbersome than other states when it comes to taxes and filings. Even if you create a non-CA LLC, if you are managing the business from California, you will likely be deemed to be "doing business" in California and therefore likely subject to CA taxes. California charges a minimum tax of $800 a year per LLC, and more if you have gross receipts in excess of $250k. So, if you create an LLC in another state, you will likely need to register it as a foreign LLC in California. Though, this process will be the same for the other state (if you created a CA LLC you may need to register it as a foreign LLC in the state in which you are doing business/holding property). This means that you will probably need to pay registration and filing fees in at least 2 states if you don't buy CA property as a CA resident.

Solid answer.

Also, someone above mentioned S Corps. S Corps do not own rental real estate is most situations. S Corps primary function is to reduce self-employment taxes, and rental income is not subject to these taxes. You also have the problem of appreciated assets and then losing S Corp / revoking S Corp, and these assets are distributed to the shareholders at fair market value. Capital gains with cash is bad.

But I do recommend partnerships for most STRs for a handful of reasons-

https://wcginc.com/kb/rental-partnerships/

Quote from @Alyson Gordon:

Hi Karen, 

The STR rental is separate from the LTR and other income but the bonus depreciation creates an active loss you can take against your W2 income (vs a loss you push forward into the future).

If you qualify as REP then you don't need the loophole even though your husband is W2 assuming you're filing jointly.

Does that answer your question?

Solid answer. I would also add... you (Karen) are the material income earner, it is unlikely you can have REP status. Stay at home dad would have to fulfill the requirements.

Usually you put the LLC in the state where the activity is located. California and many other states will "impute" your activity to your resident state regardless. In other words, you have a rental in Colorado and have an LLC also registered in Colorado. But you are a California resident... you will have to file Form 568 in California and pay their LLC fee.

Oh, and LLCs are lousy asset protection mechanisms. If you are a lousy landlord, an LLC is not going to protect from injuries and subsequent litigation.

Agree with these responses. Any clothing that is suitable for everyday use is not deductible. Logo does not change it unless you can demonstrate that the logo is ordinary and necessary (the underpinnings to any business / rental deduction).

Overall you need to be wary of unreasonableness. Pigs get fed and hogs get slaughtered.

There are a zillion answers here... this is quite simple. You were on title. You had gains according to your tax return (and as others said, perhaps depreciation recapture or perhaps preparer error or perhaps you don't fully understand your tax return).

Your loan has nothing to do with gains. What you sold it for less what you paid for it less improvements and selling expenses, plus depreciation recapture = gains. Again, quite simple.

Jake has a great answer. If you have an STR and you materially participate, you do not need REP status. If you don't materially participate (and assuming this is your only rental), then REP status isn't available.

So, we typically see REP status with MTR and LTRs... but not needed with STRs. However, should you have net rental income that is subject to net investment income tax, then REP status would be helpful to avoid NIIT.