All Forum Posts by: Logan Allec

@Katie L. and @Manolo D. thanks for the tags!  @Tim Watkins, it sounds like you have a 2-person LLC, and assuming you did not elect to be treated as a corporation, it will be treated as a partnership for tax purposes. Did your previous accountant extend the partnership return? I hope so since the deadline was March 15!

Welcome, @Adam Weber.  Good to see other Angelenos around the boards.

@Yonah Weiss thanks for the tag.

@Hiro Kitagawa, qualified improvement property has become a bit more interesting than your CPA made it out to be.

Now, there is in fact a category for owners of non-residential real property called qualified improvement property (QIP) that as of 1/1/18 replaced the old qualified improvement property (yes, same), qualified leasehold improvement, qualified retail improvement, and qualified restaurant property classification rules, as well as includes some property that would not have fallen into those buckets previously.

The committee reports indicated that QIP placed in service on or after 1/1/18 would be eligible for a 15-year depreciable life as well as bonus depreciation rather than the standard 39-year, non-bonus eligible method applied to non-residential real property.

However, the law was not drafted correctly, i.e., there was a technical error, and the section of the tax code describing 15-year property (Section 168(e)(3)(E)) was in fact not amended to include qualified improvement property.

So for now, strictly-speaking, in 2018, qualified improvement property is regular old 39-year property that is not eligible for bonus depreciation.

We do expect that a technical correction to the law will be made, but for now the IRS has actually stated that it cannot guarantee that absent legislative correction it will accept the legislatively intended change in recovery period and bonus eligibility.

Anyway, this is neither here nor there since you have stated you are a landlord of residential rental property rather than non-residential real estate.

And this does not affect the application of 100% bonus depreciation to both qualifying new and used property place in service after 9/27/17 and before 1/1/23 that @Yonah Weiss pointed out.

@Tamas Z., @Alan Rohrer is correct.  You will take your purchase price and add various acquisition-related costs, typically found on your closing statement.  This is your total basis that you will split between land and building and possibly other asset classes if you were to do a cost segregation.  This of course assumes that this property was not acquired in a 1031 exchange.

However, any costs incurred to acquire your mortgage (if you have one, which it sounds like you do since you got an appraisal) should be amortized over the term of your mortgage.

Also, there are some costs on your closing statement that you may be able to expense immediately.

Also, it's possible that you incurred some additional costs that increase your basis in the property post-acquisition or possibly even pre-acquisition.

You may also have start-up costs that you may deduct up to $5,000 (assuming you don't have in excess of $50,000 of these costs), the excess being amortized over 180 months.

Check with your tax professional.

@Dustin Burke A good CPA would tell you to consult with an attorney for any matters pertaining to asset protection, drafting operating/partnership agreements, etc.

Not sure you need a tax attorney unless you have some tax controversy or complex situation where you need an opinion or memo prepared (doesn't sound like it) but rather a good business attorney who works with real estate investors.  If you need one in California, I have a good one.

@Don Spafford Running a business through an LLC or not (assuming LLC has not made an election to be taxed as a corp or S corp election) has no bearing whether it's subject to self-employment tax. Assuming this is just a plain vanilla rental, it should not be subject to self-employment tax, and it belongs on Schedule E, not Schedule C, where it sounds like your tax software is currently putting it. I'd recommend you work with a tax professional to make sure everything's done right because it just gets more expensive to fix things later on...that whole "ounce of prevention" thing.

@Hardik Patel what markets are you looking at?

@Account Closed could probably chime in with more details.

I mean it sounds like they actually did work.  "for the work they did in my business"

@Justin Denham how old are your kids and what kind of tax entity were they paid out of (S corp, LLC disregarded for tax purposes, etc.) and who are the owners of this entity (e.g., just you, you and your wife, you and a third party)?