All Forum Posts by: Joshua Thompson

Hi Matthew,

This is a great and valid question! Being a tax professional I would say currently it doesn't sound like something you need just yet. Regardless a consultation or meeting with a tax professional will provide a TON of value and information but if you're 6 - 12 months out from determining if you'll make these big moves then it might be a bit early. Now this might be an unpopular answer compared to my colleagues but it might not be necessary just yet especially if you're savvy and know a bit about taxes. 

Now if you have other major things going on in your life then yes by all means I would recommend meeting with a tax professional yesterday but it might be a bit early. However, there is nearly 0% downside to meeting with a tax professional early and building that relationship. It wouldn't hurt if you wanted to do that now as they could provide good information as you move forward and make decisions.

Benefits: building a relationship, shopping firms to get the best fit, knowledge regarding big financial decision before they occur, knowing if  you're making any major mistakes, determining if your plans will actually help you tax wise 

Summary

It might be too early but only something good can come out of a meeting with a knowledgable tax professional earlier rather than later.

Hi Art, when buying real estate in a Self Directed IRA it's typically recommended the property is paid in cash and holds no debt. If there is debt on the property you run into the debt-financed property issue which can cause the rent to be treated as UBIT and be subject to the trust tax rate which increases to 37% extremely fast.

Hi Chris! 

It COULD work! The reason I say could is because your current income, tax situation, and real estate investments can dictate if buying real estate might benefit you. Depending on your business you also want to keep in mind that some of those funds you take out of that business might need to be used for taxes as self-employment taxes typically don't go away by investing in real estate. Reach out to your tax advisor, who might be deep in extension tax returns at the moment, and ask to have a consult or sit down. That tax advisor should be able to answer this better for you based on your current tax situation. Let me know how it goes!

Hi Ayoka!

Certain cost might need to be capitalized and depreciated over time and given the rehab was over $100,000 I'm sure there will be a few large transactions that need to be capitalized. However, with the property being placed into service it does help your case to allow for certain expenses to be deducted in the current year. Depending on your situation it might be better to elect to capitalize on all rehab expenses and a great conversation to have with your tax professional

Quote from @Marc Shin:

@Joshua Thompson thanks! when you say "Sole owner", is it ok if my wife and I are both "Sole owners" of the LLC? and is sole owner and sole member the same thing? I don't think i specified a sole owner in the LLC, only sole members

 Hi Marc,

Great questions! To be clear sole owner and sole member are typically the same thing. If you and your wife own it together, then you have options to determine how to handle this. This would be better answered in a private setting with your tax professional to determine the best steps moving forward and structure.

Quote from @Rashad George:

This is my first year doing LTR and I'm looking for a tax professional who is knowledgable in REI. Are there good ones that anyone would recommend in or near SAT?

I'm also wondering what process people followed to find the tax professional that works best for them. Thanks in advance for any help!

Hi Rashad,

I would recommend a remote tax professional as well to have more options. I'm in the Dallas area but we are 100% remote. There is an attorney/tax professional I know of in SAT but they do not specialize in real estate taxes that I know of. Reach out if you'd like to be connected and good luck!

Quote from @Ting Liu:

Thanks for everyone's advice! I will hire a tax accountant to handle the matter. 

 Of course and good luck! A good sit-down conversation with the tax professional should shed some light on the topic and help you determine the next steps.

This can be fairly straightforward, depending on your agreement and if a partnership return was ever filed, you'll want to report half or your portion of the basis in the property as well as half the sale price minus expenses. This should quickly calculate your half and their half to  report. Now depending on how this property was reported in the past, the agreement the two of you made, and possibly other factors this answer can change.

If you materially participate and the rental qualifies as a STR you should be able to take advantage of bonus depreciation on a STR. Keep in mind this year bonus depreciation is 60%. You do not need to have the property in your personal name, it can be owned by an LLC you're sole owner of without having to file a separate tax return.

For the most part yes and depending on what you have going on in life an LLC might be overkill and why I think John gave a terrific answer