All Forum Posts by: Paul Winka

@Account Closed Yes, you situation is similar. Do you think your borrower was acting in bad faith with never intending to pay you back, but reporting interest paid on a 1099-INT?

Hmmm, I supposed you would pay on that interest since it is reported for that year, then if you never get your principal back you would reverse that in the following tax years as a loss. In the end, it would "zero" out, because they way I see it, if you don't get your principal back, then you never received interest in the first place.  

@Basit Siddiqi Bravo for that answer. I like the way you explained it. 

You mentioned if borrower isn't doing so good. Well, I did have one borrower that I foreclosed on. He made some payments of course, strung me along for a while. Finally I foreclosed. In this case here, I did not consider my interest payments as interest, but rather as return of principal. Seems reasonable.  Now I am keeping the house as a rental, and offset his "interest payments" as return of principal and reducing my basis for the house. For example, he borrowed $25K, paid me $3K in "interest", now I foreclose, have my purchase basis as $22K now, and am adding the costs of rehab and the foreclosure itself as part of the depreciable basis on top of that $22K, then will have my total basis here soon right before I put the house in service. Just curious if you had any comments on how I did this. My CPA will weigh in too in a couple weeks. :) 

@Mark Dante In this case, I would be the lender getting paid off when the home sells. I should be able to see the HUD, correct? How can I arrange it so I can get a copy of the HUD? I am getting pushback from the title company when I request the HUD; they are just telling me to get it from the seller. I see myself as an interested party that has reason to see it and don't understand why I need to the seller's (borrower's) permission. What would be the mechanism (maybe a paragraph in my loan document) that says I am allowed to see all HUDs from purchase and sale?

@Basit Siddiqi Yes, I know it should be secured, but my question is how many years can that loss be carried forward? Most people don't have another $400K in income to offset that. 

If, hypothetically, I lend $400K unsecured and my borrower disappears off the grid, I will have a huge loss. Is that a loss I would be able to spread over several years for tax purposes?  

It's doubtful this will happen, but if the sky falls someday in this what-if scenario, it's good to know what would happen.  

I do private lending. I have a primary borrower. When a transaction closes, the principal and the interest are rolled to another loan. Thus, I never touch any of the money. Is that interest considered income for tax purposes when I haven't "touched" it? 

When a home is sold, and I am the lender (I do private lending), do I have the right to get the HUD settlement statement?

@Linda Weygant @Brandon Hall @Lance Lvovsky @Andy D. @Dmitriy Fomichenko

Wow, lots of replies. Andy, I'll try not to be down on CPAs, but I don't feel I got value out of this experience. I am paying top dollar for the same thing I was getting before with a journeyman tax preparer for my empire of 2 properties. I am disillusioned and disappointed. Forgot to mention above that my return didn't get done until 14 Apr after I had everything in to her by 14 Feb. In the past I'd had everything done by the first week of March. 

I am leaning toward firing my CPA and going back to the firm I was at before. It's only been this one year I've used her. Of course, I need to negotiate this bill first and pay what is fair. 

Should I just insist on paying $900 like was mentioned? Am I negotiating from a strong position in this situation or does she have the upper hand?  What is one thing I should do to have a positive outcome? Thanks for the tips. 

So I am trying to get my "team" together as I develop my r/e career so I quit using a vanilla, nonspecialized tax preparer and hired a CPA and spent $500 for a few hours of her time for QB set up assistance. I keyed in a few hundred transactions, sent the CPA my QB files. I then got an estimate to prepare my return of $900 in February. Ok, fine. Tax season is over, Uncle Sam has been paid, but now I just got emailed a bill from my CPA for $1600. I have 2 rental properties, 1 earned income, a relatively simple return. 

I keyed all my stuff in QB and did it so well that the CPA said no changes were made. $2100 ($1600 + $500) seems like a lot considering I was paying $300 for tax prep before. Only thing that I could see raising the bill is that I am new client and some review of depreciation schedules for my properties would need to be validated in past years' returns. But that's it. 

Truth is, I will admit being ignorant about having a frame of reference for what CPA tax prep should cost like what gallon of gas or loaf of bread should cost, so I might be concerned over nothing. If this is just the cost of doing business, so be it, but I really don't know. Would appreciate others weighing in with their feedback. Thanks! 

Well, the job is finished. Here are the pictures below. Here’s what I learned: if you are doing some the work yourself, and you have painting on your list and refinishing the hardwood floors, don’t waste a second thinking about putting down drop cloths over those hardwood floors. You are not going to “mitigate” the damage to the floor by putting down drop cloths. One of my other concerns were that the guy that I would hire to do the hardwood floors would damage the baseboards and that the quality of the job near the baseboards would not be as good as in the center of the room. But it was just fine. And finally, the water damage that was present I thought would be unsalvageable, but that came out fine too. Total cost was $1920 for 800 ft.². The job took five days, that was from the day the job started until I was able to walk on the floors. Thanks for all those that offered advice here. It made a difference.