All Forum Posts by: Natalie Kolodij

I actually have a great referral for a REI specialized Tax Pro in the DFW Area

Josh Youngblood with The Youngblood Group 

I would recommend a tax professional for this one. Below is the time estimate for form 3115 from the form instructions. It can be a tricky one. 

But a few things: 

1. Your condos may still have land value. Did you confirm the county lists no land value? If the county lists no land value did you confirm your HOA ownership documents don't actually list you an allocated amount/portion of shared spaces and or land values?

2. Is that annual amount based on the set/existing depreciation schedule from 2019 when it dropped off? 

3. It's not prior depreciation. It should be a current  expense of the 481(a) adjustment recognizing the total amount of missed depreciation in 2024 you should have an extra $36,360 as a 481(a) adjustment in 2024; and then your 2024 depreciation amount should reflect the correct current year amount. 

4. Whether the full catch up of missed depreciation results in a tax savings or not depends on your passive loss limitations. 

If your AGI is > $100k then your ability to deduct passive losses will be limited. The 481(a) adjustment feeds into your passive loss so there may still be limitations. (assuming these are long-term rental and you're not REPS)

No- even if the son has an LLC with an EIN he does not need a new one.

If travel regulations say you need a passport to fly to Spain. 

But previously you'd flown to Japan. It doesn't mean you need a new passport to go to Spain. 

You've already done something which caused you to obtain the thing needed to go to Spain. 

If you need an EIN to file a LLC on form 1065; and you already have an LLC with an EIN; you've met the requirement.



Any LLC with an EIN retains that EIN if its classification changes under the entity classification regulations. Treas. Reg. §301.6109-1(h)(1).

If an LLC treated as a disregarded entity is later recognized as a separate entity for federal tax purposes and it has an existing EIN, it continues to use that EIN. If the LLC does not have an EIN, it must acquire an EIN and not use the owner's TIN. See Treas. Reg. §301.6109-1(h)(2)(ii).

Here's that Code Section: 

"(ii) When an entity that was disregarded as an entity separate from its owner becomes recognized as a separate entity. If a single owner entity's classification changes so that it is recognized as a separate entity for federal tax purposes, and that entity had an EIN, then the entity must use that EIN and not the TIN of the single owner. If the entity did not already have its own EIN, then the entity must acquire an EIN and not use the TIN of the single owner."

I think below is what you're looking at- 

For an LLC you need a new EIN if you create a NEW (from day 1 of setup to file taxes you need an EIN in these situations)

- LLC that's going to be a Corp 

-LLC that needs an EIN for payroll even if SMLLC

-LLC with multiple members

Making a brand new one of any of those LLC's requires a new EIN specific to that new LLC. 

Changing from single member to multi once an established LLC, or changing from being taxed as disregarded to taxed as S Corp don't require a new EIN. It's the same LLC. You're just changing your tax status. 

An LLC isn't really tangible to the IRS. It's a state established creation. 

So the IRS is just saying for filing purposes, you need an EIN for these situations : (Lists the  versions of LLC's that need an EIN from day one to file for tax purposes). 

A single member LLC doesn't NEED an EIN from day one for tax filing purposes (if it's just a disregarded SMLLC with no payroll) BUT it can choose to have an EIN. It's optional.

So if your tax status changes from the "doesn't need an EIN" category to the "needs an EIN" category...and you already have an EIN. You're fine. You have the thing the IRS requires to file the taxes. 

"When to get a new EIN"

Membership changes do not require a new LLC or a new EIN.

LLCs add and remove members all the time; there is no requirement to start a new one if that's what you're doing. 

Just to add some other options to the list 

Cost Segregation Authority 

Madison Spec

Engineered Cost Seg 

This also hasn't come up - 

Are they your dependent/a minor? 

Advertising alone won't qualify unfortunately. 

It definitely helps; but the IRS looks at other pieces as well including occupancy permits, extent of renovation, etc. It's when it's ready and available for rent. 

A normal turn around time of advertising while doing finishing touches, able to be occupied within next few weeks would be reasonable. 

Advertising at the beginning of a full studs out renovation or something that will be months down the line wouldn't work out. 

That's correct. 

Rentals as passive so if your AGI is over $150k you can't use the losses to offset your other income sources like your W2. 

You should be tracking every expense. It's a business. You want to report all valid income and expenses. 

When a passive loss is disallowed it carries to the next year. So you don't lose the benefit-you just don't get it right now. 

You will be able to use those disallowed passive losses: 

-Against other passive income 

-If this rental has net income in a later year these disallowed losses will offset that income

-When you sell a rental those carried over disallowed losses offset the gains on sale 


Other situations you hear about where people CAN use the rental losses to reduce W2 income are where the rentals qualify to be Non-Passive 

This typically happens in the following two situations: 

Real Estate Professional Status- A taxpayer or their spouse spends at least 750 during the year on real estate- and more time on it than anything else. (this is simplified but basically can't have a W2 job; must be FT real estate in some way)

Short Term Rental Loophole -If an average guest stay during the year is 7 days or less and you materially participate in the property it is by definition non-passive. 

With mid-term rentals if your average guest stay is 30 days or less but you provide substantial personal services (daily maid service, meals, shuttles etc, more like a hotel) then it would be non-passive...but you'd also pay self employment tax on any income as well. 

Just to confirm- does your wife have any other W2 job? 

And as others have mentioned existing passive activities do not become non-passive once REPS is achieved. 

They move into the bucket of a former passive activity- you can read more on it in code section §469(f). 

Many people end up making a grouping election to treat all rentals as one activity so that as a REP they don't have to meet MP in each property independently; this can also impact the treatment of those former PALs and how they apply, and what will free them up.