All Forum Posts by: Ketan Pattani

@Nicholas Aiola

Thank you! for being so generous answering our questions.

I have a tax question with regard to depreciation.  Since land value is not used in basis for calculating depreciation on form 4562, how is land appreciation taken into account when it is sold.  Basically, is the total value of property when purchased and sold reported to IRS somewhere not just depreciable value? Where?

Thanks,

Ketan

How does land appreciation and/or value figure into depreciation recapture?   

I have a non-residential rental property that I leased out last year and I am filling out Form 4562 for figuring out MACRS depreciation(39 years MM, SL).  I assume the basis for depreciation does not include land.  I was going to use a proportional ratio based on county assessment to figure out the value of the building.  I think I got this correct so far.  Please correct me if I got something wrong.

The question I have is, is there a place to report the total cost basis for the property including land?  How will the IRS know when I sell the property how much the land was worth when I purchased it?  How does appreciation of land figure into calculating depreciation recapture?

Also, I am confused about section 179 election to expense.  Does it even apply to real property?

Thanks,

Ketan

Thanks! I will ask about that.  I think it is more about renting to self.  In my case I may actually pay more taxes by reducing passive income, so it should be fine, I hope.

Does anyone have any thoughts to this question?  

Thanks,

Ketan

Hi BP,

I am buying an office condo under my single member LLC and plan on leasing it to my wifes' S-corp LLC. Currently she does not make much profit at her current lease elsewhere. We were thinking that the rent could be just enough to cover the costs + any depreciation that I could take on the condo. During an initial consultation with the CPA, the CPA said that the rent would have to be fair market value. That may be too much rent since this place is bigger than her current place. Is there a IRS or Texas rule that I have to charge a minimum rent? I have read articles online which say that IRS might look at overcharging rent to increase passive income, but I am looking to actually undercharge rent.

Thanks,

Ketan

Thanks! Guys.  I am going to get a CPA.  Just wanted to make sure when I go there I know what to ask and understand when answer is given.  

Thanks! Shawn. Would I need to pay interest on that loan? Or since it is short term and less than 10000 it would be ok? 

Hi BP,

I just got my single member LLC to buy a property to lease to my wife's business. We are meeting with the broker of the property we are interested in, on Monday. I applied for EIN for the LLC online, however, I got reference number 101, most likely because the name of my business is in another state. I had to fax my application with Certificate of Formation to IRS and they said it will take 4 days to process.

So, if we decide to purchase the property under the LLC name, we would have to make a deposit or earnest money. Since I don't have an EIN, I can't open a bank account unless I use my SSN.

Would there be trouble to change it to EIN later?

Alternately, can I pay the deposit from personal funds without it being considered commingling?

Thanks,

Ketan

Thanks! Ronald. Learnt something new. Would the interest not cancel out though? Interest would be deducted as expense by LLC which would lower the income on K-1 if as S corp, correct?