All Forum Posts by: Michael Plaks

Here is my much longer and much older rant on the topic, along with comments from other people who are not as obnoxious as I am:

https://www.biggerpockets.com/forums/51/topics/841844-good-t...

Quote from @Jeffrey Fullard:

I am looking for someone to file my wife and I 2024 Taxes and for the rental properties

Please read this post and notice the part about us being prohibited from offering our help to you, as long as this post stays on the Tax forum. Maybe they will move it into Classifieds, and then we will be allowed to say "give me a call."
https://www.biggerpockets.com/forums/51/topics/1222774-expla...

Quote from @Dan Hawtree:

A "tax strategist" is someone anuitizing what is typically an annual tax planning discussion. There are plenty of competent real estate knowledgeable tax advisors without the yoke of a subscription.   

Both "tax strategist" and "tax advisor" are merely self-assigned marketing-based descriptions. They do not convey the business model used by the person - as in subscription or otherwise - and they do not convey any specific qualification or service, either.
https://www.biggerpockets.com/forums/51/topics/1222774-expla...

Quote from @Franklin Marquette:

Hey all does anyone know of any good books, articles, etc learn about tax strategy? I only have 1 property and a W2 so am just starting at not really at the stage where it makes sense to hire an expensive tax strategist (unless the forum disagrees).

Despite this, obviously want to make sure I am tax efficient. Just looking for any affordable resources, tools, etc.

Thanks!

Bigger Pockets bookstore sells two decent books on tax strategies.

You can also shop on Amazon for books by Sandy Botkin, Stephen Fishman, Tom Wheelright and Diana Kennedy 

Quote from @Angelo Llamas:

@Michael Plaks thanks for responding but okay that makes sense at least one of us can get it because yes I plan on doing all the day to day approving guest scheduling repairs, book keeping etc I don't plan on using property management so I'll be pretty heavily involved in the STR

Sadly, I see some incorrect advice on this thread, even from fellow professionals. Proceed with caution. 

Your brother co-signing does not automatically make him a co-owner. We would need to review your arrangement before deciding whether the property is 100% yours or 50/50 - both scenarios are possible.

If it's 100% you, you are obviously entitled to the full tax benefit, with some gotchas. If it's 50/50, it gets far more complicated.  The tax benefit will also be split 50/50 however it's very possible that only one of you will be able to utilize your respective half. This is because each of you will need to separately meet the "material participation" test, and it would require both of you being very heavily involved in day-to-day management.

In fact, it's possible that neither of you passes this "material participation" test, and then neither one gets the immediate tax benefit that you expect. By the way, you have the same "material participation" obstacle even if you own the property 100%.

$25k number comes from a completely different tax rule and has nothing to do with STRs. Your number can be lower or higher than this.

Whichever TikToker/YouTuber gave you the impression that STRs come with an automatic $25k tax write-off did not explain (or maybe did not understand) how it really works. Read this:
https://www.biggerpockets.com/forums/51/topics/1122635-the-s...

Listen, folks. We can forever argue about California weather and California politics, with no chance of agreeing.

However there is one thing about California which is not debatable and legitimately makes it the most despised state. It hosts the darn Golden State Warriors. That does it.

Quote from @Chris Wade:

In 2016, there were two Chief Counsel Rulings by the Franchise Tax Board where they declared, at least in some instances, that business trusts like a Wyoming Statutory Trust, are not considered "corporations" and would therefore not be subject to the minimum franchise tax as defined in CA Rev & Tax Code § 23153. As long as the Wyoming Statutory Trust is taxed as a disregarded entity, it has not triggered the minimum franchise tax for hundreds of our clients who have utilized them successfully. Here is a link to one of the Chief Counsel Rulings 
https://www.ftb.ca.gov/tax-pros/law/chief-counsel-rulings/20...

Chris, I appreciate you entering the discussion, and it would be helpful for us if you explicitly mentioned that you work for Anderson as their legal counsel.

I have three questions about the link you provided, and I am NOT an attorney, so these are layman's questions.

1. As all private rulings, it contains a disclaimer that we probably should not ignore:
"Please be advised that the tax consequences expressed in this Chief Counsel Ruling are
applicable only to the named taxpayer and are based upon and limited to the facts you have
submitted."

In other words, this is not a legal precedent, as far as I understand, and the FTB is not bound by it - am I mistaken?

2. The ruling refers to a Massachusetts Business Trust, not a Wyoming Statutory Trust. Does it matter?

3. Most importantly, it addresses a corporation defined under CA RTC Section 23153. However, what we are discussing here is an LLC, and it is controlled by a different CA RTC section, Section 17941. And while 17941 does refer to 23153 in respect to the amount of the fee, it does not appear to defer to 23153 as far as the imposition of this tax.

In other words, per my non-attorney reading of your linked document, it does not shield LLCs from the $800 extortion. 

Please clarify what am I missing here. Thank you.

@Andreas W.

We are brothers, and we inherited half of a $1 MM property, so you own $500k, and I own $500k. And of the second $2 MM property, we each own $1 MM. We both own $1.5 MM apiece, and there's peace in the family.

Now you convinced me to exchange shares, and now you own the $2 MM property, and I own the $1 MM property. And, like you said, no money exchanged hands. Huh? Wait, what just happened?!? I was cool with it because we're brothers, but my wife ain't cool with it at all. Thanksgiving is cancelled.

To answer my own earlier question of what just happened - a gift happened! I just made a huge gift to you, my beloved but cunning brother!

Gifts of this magnitude are reportable to the IRS, although it does not trigger any tax consequences on either of us. At least not while we are alive.

Quote from @Grant Rogers:

I'm looking for a tax professional in the Indianapolis area. I'm primarily interested in tax planning and advice. Does anyone have any recommendations?

Here is my post about finding a tax professional:
https://www.biggerpockets.com/forums/51/topics/1222774-expla...

and it mentions why I think looking locally should not be a priority