All Forum Posts by: Jim T.

Epilog

It was ammended on 5/29 to read

This is a big improvement. It was put to vote on 5/31 and still lost. So this is now a non-issue.

If anyone contacted their state representatives, I thank you.

If anyone was annoyed that I posted in a general board about a California specific issue, I apologize. I felt this was important.

For everybody, in all states, I encourage you to keep track of what your legislatures are doing with regard to rentals. There is a war against landlords because we are perceived as greedy. Legislatures do not always come up with the best solutions, only solutions that they feel will garner votes. 

@Josiah Collins I apologize, In my haste I forgot to include the link 

 https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB2925

The bill seeks to limit how a landlord can end a tenancy. Included in this is ownership change, in ther words, the tenancy can not be terminated when you sell your rental. This might be fine for multi units but for single unit rentals, it is common to sell to a non-landlord. This bill would prohibit that. Please notify your state representatives   http://findyourrep.legislature.ca.gov/

Regerence 1646.2(b)(1)

SECTION 1.

Section 1946.2 is added to the Civil Code, to read:

(a) A landlord shall not issue a notice to terminate a tenancy pursuant to Section 1946 or 1946.1 1946.1, or seek to recover possession from a tenant under subdivision (1) of Section 1161 of the Code of Civil Procedure, except upon good for cause, as set forth with particularity in the notice.

(b) The following shall not constitute good cause for termination of a tenancy or eviction of a tenant for purposes of this section:

(1) A change change, or anticipated change, in ownership of the property.

(2) Foreclosure of the property.

(3) Expiration of a fixed-term lease.

(c) It is the intent of the Legislature to encourage, incentivize, or require encourage or incentivize cities to enact just cause eviction ordinances in order to prevent unnecessary displacement of tenants.

(d) This section is in addition to, and does not supersede or preempt, any other state or local law requiring the showing of good cause prior to the regulating the grounds for eviction or termination of a tenancy.

I use Quicken Real Estate Edition (yes Quicken) and it has a mobile app that I use to take a picture of the receipt and create a line item (with that pic as an attachment). It takes 5-10 seconds. If it is something I received the receipt through email, it is even easier to attach the image to the line item.  

I then take the receipt (if I have a physical one) and put it in a file for the year. At the end of the year, I seal that file in a manila envelope and start a new one. I don't really know why I save the paper at all, but I do.  

The line item in Quicken has a type, such as repair, insurance payment, etc. It also allows me to write a short comment if I choose.   I use a tag to identify which property. At the end of the year, this all imports into TurboTax without change. (depreciated items I have to enter manually into Turbotax)

So I spend seconds each purchase and no time at the end of the year. I really like having an image of the receipt  right there in Quicken. Everything in one place.  And I can check the accounting during the year. This helps me toward the end of the year to decide which year to incur an expense, as an example.  Also, everything is accessible from my phone.  

All my computer files are regularly backed-up offsite. My house can burn down and I would be back in action immediately after I had Quicken installed on a new machine. Paper sucks, really

There was some turbulence in Quicken a year or two ago. I was going to move to a google-docs spreadsheet and write my own image capture in order to attach it to the line item. Quicken ended up spinning off from Intuit and ramped up the development dollars so I put aside my effort.   

I understand this process a little differently

I will use your same example; you buy a rental home on January 1, 2012, for $200,000. On January 1, 2015, you convert the property into your principal residence, where you live until you sell the home on January 1, 2018, for $350,000

The Non-Qualified Usage is 3 years and total ownership is 6 years. I calculate the ratio the same way you did so 3/6 or 50%.

But I thought you reduce the exclusion amount, (e.g. $250,000 for a single) not the cap gain. So now he has a $125,000 exclusion. His profit ($150,000) has a $125,000 exclusion or $25,000 taxable.

Of course, there is depreciation to deal with too. Whatever he deducted in depreciation (or was supposed to deduct) is brought back into play. Let’s say he deducted $10,000 in depreciation for the 3 years it was a rental.

Here is how it plays (Federal only)

$10,000 is taxed at ordinary income rate with a cap of 25%

$25,000 is taxed at long term capital gains rate

Corrections very much appreciated! I am not a pro 

And to the OP, this example is not yours, this is if it was used for non-qualified (one example is for a rental) usage first. In your example, you are entitled to the full exclusion. You do have to recapture what your were entitled to take in depreciation (whether you did or not) and that is taxed at ordinary income with a limit of 25%

@Ansari A.

You should enter the entire loss for 2017. If you are doing the taxes by hand, look here https://www.irs.gov/forms-pubs/about-form-8582-pas...

There are worksheets that must be filled in and sent with your return that will indicate your total loss, the amount allowed this year, and the amount suspended. 

If you are using tax software, I assume it will keep track of it all.

I think there is some confusion because of how you worded this. I think the issue the HRBlock preparer said was that you can't deduct Schedule E losses against W2 income.  

This may or may not be true depending on whether you are a real estate professional. I will assume you are not. Then if your MAGI (Modified Adjusted Gross Income) is greater than $150,000, then you can't deduct the SchE losses against that income. If your MAGI is less than $100,000, then you can deduct up to $25,000. If your MAGI is greater than $100,000 and less than $150,000, a partial deduction is allowed. (there are other conditions as well, you must actively participate, be at least a 10% owner, etc) 

If your deduction is not allowed, all is not lost. These losses are suspended and can be used in future years. Even if your income never gets low enough or you don't actively participate, at some point the suspended deductions can be applied to the profits when they occur. Even if you never have enough profit to deduct all these losses, they can be deducted when you sell. So, keep track of suspended deductions. 

You need to research this. I am not suggesting everything I wrote is complete. I am just giving an idea what happens. 

@Logan Allec @Basit Siddiqi, thank you

@Logan Allec or anyone else

For CA LLC's, the fee is $800/year. Is this the same thing where it really isn't a fee but an advance tax payment? Or is it because she had exactly zero income. As an example, if she had a small income but the CA taxes on that income is less than $800, would she get the difference returned? (and she has an S Corp but I am wondering if it is the same on LLCs).

My real question, I have been tempted to put my properties in an LLC but don't want to pay the $800/year. If it is just an advance on the CA taxes, then I would not have a problem with it.

Sorry for stealing your thread Mary. 

 Even if the association owns the land, don't the individual condo owners own the association? I know there are situations where somebody else owns the land and the condo owners pay rent for the usage of that land (or the association pays the rent on behalf of the owners). But in the absence of that, I thought condo owners do own a portion of the land the building is on