All Forum Posts by: Account Closed

Again, I'm not an accountant, but the way it was explained to me is the purpose of a safe harbor is you satisfy the safe harbor and then you get to stop.  You don't have to keep running rules after that.

So unless the safe harbors specifically excludes anything, as long as it's below $2500 per item including labor, then it's deductible.

That price is about average, but honestly unless you have a complex set up I would just do it online. LegalZoom or one of the other websites has got this down to a science.

Highly recommended (Won't let me post contact info):

Mark Murrell

JBGoodwin Realtors
Westlake Division Vice President | REALTOR
1613 S. Capital of Texas Hwy., Ste. 100

Austin, TX 78746

I will add to what Jason said, and I'm not an expert here, but my family has several rental properties behind an LLC. I have been unable to get reasonably priced cash out loans for the rental properties in our portfolio. The best quote that I've gotten is 9%.

Basically, Dodd/Frank prevented lenders from securitizing and selling those loans, so they must be kept on the books.

I'm assuming since you have four families involved that you would need some sort of entity to hold the shares, and that's going to make it difficult to find financing. I would also guess that that eliminates the possibility of you getting a VA loan.

Thanks all.  I'm going to keep working on this. Out of the country for a few weeks, but I've already filed my tax extension and have till September now to figure this out

On second read, 263A does seem to apply to my scenario 1, so I may stand corrected.

@Brandon Hall  Do you happen to know what section of code governs this?

@Account Closed  I'm interested in figuring out whether the de minimis safe harbor can apply to expenses that would otherwise be capitalized before a property is placed in service, and also whether the de minimis safe harbor applies to the same expenses after a property is placed in service.

I guess the two fact patterns would go like this:

Assume that the taxpayer does everything necessary to qualify and claim the de minimis safe harbor.

Taxpayer purchases a house for $50,000, does a $5000 remodel before it's placed in service which includes $2000 of cabinets, $1000 of countertops, $1000 of flooring, and $1000 of miscellaneous supplies. Assume there is no labor cost, because the taxpayer does the work himself. Also assume that the work, otherwise, would be a betterment and normally capitalized.

Instead of capitalizing, can the taxpayer take $5000 of de minimis deductions?  If not, why not?

Now, assume the same fact pattern, except let's say the house was placed in service last year, and there has recently been a vacation of the tenant.

Can the taxpayer still take the $5000 de minimis deduction? If not, why not?

I believe I've laid out a decent case for the affirmative, but I would be quite happy if someone could give me a convincing case in the negative.

If I'm correct, then this could save all of us a bunch of money, and I'm willing to do the legwork on this to figure it out and report back.

@Brandon Hall  Again, just trying to walk myself through your thought process.

You say that it matters whether we are talking about section 1245 assets or section 1250 assets, but both are considered tangible property, which is the language used in the de minimis definition:

"Except as otherwise provided in paragraph (f)(2) of this section, a taxpayer electing to apply the de minimis safe harbor under this paragraph (f) may not capitalize under § 1.263(a)-2(d)(1) or § 1.263(a)-3(d)any amount paid in the taxable year for the acquisition or production of a unit of tangible property nor treat as a material or supply under § 1.162-3(a) any amount paid in the taxable year for tangible property if the amount specified under this paragraph (f)(1) meets the requirements of paragraph (f)(1)(i) or (f)(1)(ii) of this section."

The only exception is section 263A property, but that's basically inventory.

I honestly just don't see where you're getting that it matters whether it's personal property or real property.

Interesting, Matthew. How much would it cost and how much time does it take to get a private letter opinion?

I'd easily spend $10,000 on it.