All Forum Posts by: John Pak

Thank you, Steve.  Clear enough!

Dear wife's beloved aunt passed away and she inherited a small portion of the aunt's retirement TSA (tax sheltered annuity), which I understand is similar to a 403(b). Line 5 of the Estate Schedule K-1 (from form 1041) says it's "other portfolio and nonbusiness income."  Does this mean that this is passive or non-passive?  Because if it were passive, I was wondering if I could use our carryover passive activity loss from our real estate rentals (we do active participation but cannot use the PAL against regular income due to income limit).  In filling out the data from the Schedule K-1, TurboTax is asking me whether I have passive activity loss carrovers in Regular Tax and AMT.  Of course I do, but I am concerned that I might be mixing different category of income with PAL from real estate rentals.    

Sorry, forgot to add comments to the reply above.  

Brandon, THANK YOU for your post.  Now I understand what Linda meant earlier and how this can be done!

Thanks, everyone.  Appreciate the helpful comments.  

Linda, yes, I did subsequently buy investment property #3 in the same year, 2015, that I incurred the aforementioned $1200 expense (for the property that I did not buy).  So I can add the $1200 expense to the cost basis of investment property #3?  If the IRS were to ever ask why I am claiming, for example a home inspection for a different property, what would my rationale be?  I am guessing it was the expense necessary to eventually find property #3?  Thank you.  

I incurred about $1200 in expenses in trying to buy an investment property. After many inspections, professional opinions, and negotiations, I backed out because the price was too high vs. estimated renovation costs. At the time I incurred the $1200 expense, I owned two other rental properties, so this was not exactly a "start up" cost. I do not have an LLC or any other business entity.

All the reading I have done seems to indicate that this is an expense that cannot be deducted.  I can sort of understand that because I don't have a property that I can expense this against in Schedule E.  Trying for a regular investment expense would not work because of the 2% rule.  

So is there anything I'm missing?  Thank you.  

I get the vibe from the community to let this pass and let the good tenant go and let him cancel utilities as soon as I can pick it up.  I have heard you loud and clear.  

Just to clarify about utilities as some of you have questioned what the issue is -- in my area, they charge a lot (not refundable) to set up the utilities account.  I think the last time I had utilities in my name for about 7 days in the spring and it cost me >$250.  Also, the place is already rented to a new tenant starting the 1st of the month, and the new tenant has already submitted utilities changeover request for the 1st of the month.  If I were to submit a newer utilities request to cover 15th to 30th, I am afraid the consecutive changeover within a span of 15 days will get messed up.  The new tenant is out of the country so I don't want to bother him about this.  

Bottom line though, I have heard from the community to let this one go and I believe it is good advice.  Thank you!

Mitigation:  The tenant who wants to move out 2 weeks early informed me too late (during the last month), and by that time I had already rented the house to a new tenant who will move in and take over utilities on the 1st of the month. 

Utilities:  Since the lease was to expire on the 30th of the current month and new tenant arrives on the 1st of the month, there would have been no gap in utilities between tenants.  

Question:  Should I make the current tenant (final month rent has been fully paid), the one who wants to vacate 2 weeks early, keep utilities in his name and pay for AC + lawn mowing during the final 2 weeks? Excellent tenant for 2.5 years.  

Cost: about $400 total for -- transferring and paying set up fees for utilities, running a SFH AC for 2 summer weeks (90s weather), and paying for 2 lawn cuts.

Pros and Cons: 

maintain good relationship, don't have to worry about whether tenant is keeping up with utilities, extra time to do maintenance and repairs that I did not have before.  

Cons:  $400 in extra costs, risk that the tenant could argue I let him leave early and try to get a refund in rent. 

Thank you again for all the helpful advice.  

Tenant with good history wants to vacate a SFH rental 2 weeks early. He has paid the last month rent and is currently not asking for any money back (initially he did but I said no). As I understand it, he simply wants to do the check out inspection and return keys due to job/family logistics issues. I have told him that we can do an initial inspection now but I will have to do another, final one on the last day of the lease. I will insist on utilities being kept in his account until the end of the lease term.

Is there anything wrong or cautionary about doing an early check out inspection and accepting keys 2 weeks early from a paid-up tenant who wants to vacate? For example, by accepting his keys & doing the inspection early, am I somehow constructively permitting him to leave before his lease expires, i.e. agreeing to change in lease term or letting him stop utilities?  

Thanks in advance for any pearls of hard-earned wisdom.

Bill, my capital gains on the primary residence is not in excess of 500K.  Thanks.