All Forum Posts by: Matt Ward

@Dan Trinh you can absolutely deduct travel expenses to visit your rentals.  

@Lee Ripma yes many people have Sche E properties w/no LLC.

Consult your Tax Pro!  Happy to help!

So basically we are where we were before 199A, with sifting through the grey matter when trying to define a trade or business under 162 which doesn't define it clearly itself... but per the Supreme Court in Groetzinger, 480 U.S. 23, 35 (1987), said, “We accept the fact that to be engaged in a trade or business, the taxpayer must be involved in the activity with continuity and regularity and that the taxpayer’s primary purpose for engaging in the activity must be for income or profit.” 

So we (Tax Pros) will need to advise our clients on the benefits of taking the 20% QBI compared to the risk from exposure that 20% deduction might create... because many will derive from the above statement that basic landlord duties fall within the definition provided above (collecting rent, qualifying tenants, bookkeeping, etc.) and I'd be hard pressed to disagree with them in a vacuum... but .... the exposure..... 

I think my main point is that it is silly for anyone to say that it (rentals) definitively DOES or DOES NOT qualify for the 199A deduction.  Let's not cause a stir over this because there is still time for more guidance or technical corrections, etc... and even if that doesn't come down, the answer should always be "it depends" and it's different for each client.

IMHO

@Shevon Coorey my partners and I have closed on several MF complexes in NorCal tertiary markets, and we have our eye on some OOS markets/properties moving into 2019.  LMK/connect with me if you'd like me to share my story!

@Bob Prisco - doesn't happen often, but if you know where to look and have the time, deals can be found!  Keep up the good work on your end as well.................................................. :)

@Bob Prisco mainly just speaking to the pro's of Multi vs SFH... SFH you have one building, one door, on tenant. You lose one tenant and 100% of your rents are gone until that one person/family is replaced. Invest in a MF, even a small 16 unit one, and that risk is spread out considerably. Also economies of scale, things of that nature. Valuations are another one, where SFH are valued by the comps, MF is valued by the numbers which are easier to control and force appreciate.

There is risk in any investment, I personally just see more risk in a SFH rental than putting my capital into a MF complex - especially if that SFH is 1,000+ miles away. The MF complexes I've been involved in this year also return 15%+, and several are even in CA so they offer appreciation as well.

REI has many facets and it's great that you've brought tremendous value to your clients. I'm just offering a different perspective and opinion.

Be well!

 I've read... Chapter 3, page 12.... difference between E and C is 'providing substantial services' (Sch C).  Sch E is for renting basic rooms, buildings, or apartments and only provide basic services such as utilities.....Schedule E even has 'vacation/short term rental' as a property type on the form.

@June Yang connect with me and I'll share my story!  Touring a Multi-Family tomorrow actually with a likely offer out on Monday....numbers look good.  There are deals to be made if you can find the time to look -- hardest part!

While this certainly doesn't help definitively define a TorB, I'd like to think that the spirit of the law was intended to include residential rentals and Sch E activity.  While the Code nor the Treas. Reg., as we all know, does not provide an explicit definition of a TorB, the Supreme Court, for purposes of IRC 162, has interpreted TorB as being conducted with "continuity or regularity" and with a primary purpose of making a profit.... so, what has changed??  Not much as of now, more guidance is needed... but if you were advising clients before on certain treatments of a rental being a business, let's say by including a De Minimus Safe Harbor election for certain expenses, would you change that now?  Like many have said, more guidance please!!!

@Stu Owens Congrats on your soon to be investments! Based on the info you've provided, why wouldn't you just go into each property as TIC and both you and your friend each own 50% of each property? This makes it much easier to divvy up income and expenses and later if you or him wanted to get out of one or both properties, there is less mess. Putting them into a LLC (or each into their own) creates extra cost (tax and lawyer fees), and you are by definition investing in the LLC which then owns the property(s), not investing in the properties directly. Consult your Tax Pro!

 Always consult your tax professional!

My experience is that Sch C in these scenarios is reserved for hosts who do provide substantial services in connection with the property, to include but not be limited to, linen cleaning, maid service, B&B type services, etc.  Otherwise, the short term rental would go on Sch E and be subject to the 14 day or 10% rule (whichever is greater) which if surpassed, would limit the amount of expenses to be taken.  Still passive income, even if actively participating.  I'm not sure I've seen the latter situation (no substantial services) put on Sch C... just my take.  Good luck!