All Forum Posts by: Jeff Nash

Hi Kenlyn, congratulations on completing your degree but as you know the learning never stops, so that's why you are on BP.  Just ask a lot of questions and listen and note the pros and cons of various suggestions and recommendations you'll receive.  I am curious to know more of the details about your primary business operations and how you plan on structuring that from a legal, accounting, and risk management standpoint. I have a commodities background so that's why I am asking.  Feel free to connect and reach out.

@Dilini Sundaram

Based on the fact pattern you presented it sounds like it might be a good option.  You would be recharacterizing passive to active income with the use of a management company.  I don't know where you stand, but if you are in a higher tax bracket a C-Corp, which is currently taxed separately as a stand-alone entity at a lower historical statutory rate (21% versus 35% since 2018), might be advantageous. Basically, you can get a management fee deduction on the LLC side at a higher rate and pick up income at a lower rate with the management company.

I assume your CPA and/or a good attorney will do what's in your collective best interest and go through the pros/cons of entity selection.   

@Melissa Koon

I would use reasonable methods to determine the breakout of the cost on the invoice between those components if you can't get the company to cooperate.  You also have bonus depreciation, 179 expensing, and this exception as well:

Small taxpayer exception for eligible building property

Qualifying small taxpayers can elect to deduct the cost of improvements made to eligible building property (Regs. Sec. 1.263(a)-3(h)). Qualifying small taxpayers have $10 million or less in average annual gross receipts for the three preceding tax years, and eligible building property includes a unit of property constituting a building, condominium, cooperative, or leased building or portion of a building with an unadjusted basis of $1 million or less. To be eligible for the exception, the total amount of repairs, maintenance, and improvements for the property for the tax year may not exceed the lesser of $10,000 or 2% of the property's unadjusted basis. If the total amount paid exceeds the safe-harbor threshold, the safe harbor does not apply to any amounts spent during the tax year.

@Taylor Michels

@Daniel Johnson noted some challenges you might encounter (location and breadth of investment options) and potential resources.  If you want to chat feel free to reach out to me as well as I might be able to help despite the geographic difference.  

@Al Jecius

There are a lot of good takeaways from the previous posts.  With investing you are obviously trying to balance asset class correlations and sync your overall portfolio with your risk tolerance, investment objectives/goals, time horizon, etc. which is unique to you.  Generally real estate and alternative assets such as commodities share space with the more widely held traditional investments (stocks, ETFs, bonds, etc). If you are interested in investing in alts feel free to reach out as I have a few resources I can share and/or point you to other knowledgeable peers.   

  @Steve Tse

We custody many of our clients at Interactive Brokers which currently is offering 4.08% just for sitting in cash (no money market or CDs).  On the flip side, they also have one of the lowest margin rates for use for investing.  

@Daniel Newman

It might make sense to do that but as you probably have  heard before with any interaction with a CPA or tax professional, "it depends".  When I work with clients I try to dig deep to understand their overall financial situation and goals beyond just what the tax returns reveal as that information is extremely relevant.  Entity selection is important for many reasons and impacts or limits certain tax strategies.  The primary motivation for the S-Corp is to mitigate the impact of self-employment taxes, namely the Social Security component which is capped annually ($160,200 this year). You have to pay yourself a "reasonable" salary as well and there is not a bright-line test but rather some general guidelines to help substantiate.  So the bottom line is that it might make sense to do (you have until March 15 this year to file Form 2553 as @Charles Carillo noted) unless a late election beyond that point is available. If you would like to discuss further feel free to reach out or consult your CPA or others in the group.  

Since you are dealing with health insurance it depends on you and your family’s needs and expected heath expenditures and the plan you are enrolled in or choose.  Ultimately what you are trying to do is not limit your tax deduction to the typical health insurance premiums only, but rather have the deduction cover all health costs that generally can only be deducted if you itemize and clear the AGI hurdle.  The other consideration is whether you just use an HSA which is arguably one of the best tax strategies out there (again, it depends on the taxpayer’s needs for health insurance), the limitation being that the contribution allowed is not higher and closer to a 401k.  Hopefully this helps. 

Hi Millie, I'd have to understand the entire fact pattern but if they are both being done in the same year you normally would do a 1031 exchange and then do the cost segregation study.  There are some complexities with how the cost basis is recorded (can be done 2 ways) and an election that can be made to ensure you maximize the deduction.  I'd be glad to discuss further.   

Hi Daniel, I would be happy to discuss your situation since you are local. @Bruce Lynn provided you with a lot of good considerations and issues to mull over.  I work with clients on both the tax angles and also potential investment ideas depending on their background, goals, time horizon, liquidity, etc.