All Forum Posts by: Bryce Christensen

@Dmitriy Fomichenko has it right on that you shouldn't and the penalties. This is a "prohibited transaction" because it is "self-dealing" in nature*. What the IRS means when you say that is that you shouldn't be able to mingle tax-advantaged and non-tax-advantaged funds to make sure people don't just take out the money and put it back whenever they want- otherwise, it's a tax advantage without a benefit (a funded retirement account). And the IRS really doesn't like tax deductions, much less those that don't accomplish their stated objective.

The Anti-Money Laundering (AML) laws are the reason you should be worried about being caught.

If you feel strongly about using your retirement funds to finance this deal, check out threads on self-directed IRAs. I'm not giving you advice to use one; I'm just saying it is an option that may fit your situation (see disclaimer).

*Sometimes I think the wording is a terrible irony; if retirement funds aren't supposed to be about advantageous deals for yourself, then who are they supposed to be advantageous for?

I'm not YOUR accountant and this advice is intended for general, informational purposes. You should consult with a CPA familiar with the laws of your jurisdiction for accounting or tax advice. An attorney may also be a good idea for legal questions. By using this advice, you agree to limit my liability to what you paid for it (that's $0, btw). Have a nice day.

Creating such a structure could have benefits in both limiting liabilities and in reducing or timing taxes. Having said that, it is a very good idea to work with a CPA on your particular situation. An attorney might be a good idea as well, but be warned they only "practice" their profession. ;)

To be serious, talking to a CPA about whether or not it is right for your situation and having an attorney draft the bylaws, articles of incorporation, etc. is a good plan.

As I'm unfamiliar with your exact situation, use of this advice is intended to be general in nature and by using it, you agree to limit my liability to the amount you paid for it (that would be $0, btw). Have a nice day.

For Federal tax purposes, LLCs can elect to be taxed as a corporation rather than as a pass-thru. If that election is taken, the result is multiple taxation of the earnings- the income is taxed at the Corp-LLC level, then again at the individual level. There are benefits in terms of timing personal income tax recognition, but for many situations you pay less tax by sticking with the pass-thru.

I'm not licensed in FL and I recommend you consult with a CPA in FL regarding your particular circumstances to receive personalized recommendations. This advice is provided for informational purposes and it's use indicates agreement to limit my liability to the amount you paid for it (that's $0, by the way). Have a nice day.

To answer the OP, the personal days are used to reduce the deductions you are claiming, as you shouldn't get the benefit of using business property for personal use and get the tax deduction as a business expense. As a result, if you use property 7 days and rent it 63 as in the IRS Example posted above, then only 90% of the expenses qualify as deductions for taxes. Since your personal use is 0%, you'll get the entire amount of your deductions, so it isn't anything to worry about.

I guess this is my cue.

For the situation you mentioned above, you would use 300 for days rented and 0 for personal. The IRS doesn't count vacancy days as part of the equation.

Here's a clarifying snippet from the instructions of page for Schedule 1040SE: "For example, you used your property for personal use for 7 days and rented it for 63 days. In most cases, 10% (7/70) of your expen­ses are not rental expenses and cannot be deducted on Schedule E."

http://www.irs.gov/pub/irs-pdf/i1040se.pdf pg. E-5

As an interesting aside, my Tax prof actually filed a brief in an appeals case arguing that for interest and depreciation, 365 days should be used because those factors are dependent on time, not occupancy. His position was adopted by the 9th Circuit Court of Appeals, so if you live within their jurisdiction, the ruling can be used to get a little bit more back from the IRS if you have a 2nd home that you used for personal use and rented and you are not otherwise able to capture all of your depreciation for tax purposes. Let me know if this applies to you and we can discuss the details.

Since you haven't paid me for this service, I am not YOUR accountant and this is merely an example for reference purposes. You rely on this information at your own risk and by using it agree to limit any legal damages to the amount paid for services (that would be $0). Have a nice day.

@Sharon Tzib It hasn't been an indepth conversation yet, but they indicated that they have been in contact with the lender. They said they tried to catch up the loan, but given the foreclosure notices, I presume those efforts were insufficient.

@Jon Holdman Having an emergency fund is solid advice and doubly so for people invested in real property.

From what I could gather on the county website, there aren't any outstanding property taxes due.

Unless it's a bad idea, I'll try to post the answers with the hopes that you guys will point out anything essential I missed. Your patience is appreciated- this is a lot different than when I was a transaction coordinator in a different state during my undergrad a dozen years ago!

Thanks, @Jon Holdman . I'm just trying to help them understand their options. And I definitely am not seeking to benefit from what ends up happening. They are losing hope because with their damaged credit history, they are getting rejected for even renting, so they know they will probably have to move out, but they haven't been able to nail down a destination. Very stressful. And the irony is this is after finding employment again- now they actually can pay their bills.

I think the posts I saw might have involved tax liens and I had thought that was similar to a loan modification. I'm now seeing the difference- being in first position ahead of the lender is a very different position than after the government and the lender. Very important difference, I'm gathering.

Thanks everyone. Now I feel like I at least know what kinds of questions to ask. The good news is a new freeway went up in the area that has sent demand for property in that area through the roof, so I expect there will be significant equity, but I'll have to talk to them about it again to find out.

Yes, I know. Just wanted to explore all of the options. They had a period of unemployment, but they are back to having regular employment/income again. Thanks for the input.

Thanks for the help above. It may be that they don't have options other than selling so I'll continue gathering information for that option, but I thought I had heard about people offering notes to people that are behind to help them keep their homes? Do you know anyone on the forum that can help me with that? I can't seem to locate the forums I read that seemed to reference it. I also don't know if it works in Texas.