All Forum Posts by: Ebere Okoye

If the old water heater was not working then you can treat it as a repair. Other alternative is to treat it as a fixture and then elect the section 179 to expense it all in the first year

The partnership can certainly sell relinquished property held in the entity's name and then purchase like-kind replacement property to be held by the same entity and still qualify for 1031 Exchange treatment. So even if it is owned just by you or you and your brother, you can still do it in the name of the llc. Now if you need to refinance then you would need to deed it out of the LLC back into your name.

First of all, congratulations on the purchase of your first rental. I will try to answer most of your questions

Owning a duplex and living in one unit while renting out the other offers numerous tax advantages over owning and living in a single-family home. The rent should offset at least part of the mortgage payment, and many of the home's expenses are deductible that would not be deductible for a single-family, owner-occupied residence.

All of the mortgage interest is deductible -- your half on Schedule A of your 1040 and the rented portion half on Schedule E (the rental income and expense schedule on your 1040). The same is true for city and county property taxes supplemental taxes and any special tax assessments. The cost of a business license is fully deductible since the license is only for the portion that is business property -- the part your renter occupies.

Repair and Improvement
All the repairs and maintenance costs to the property are proportionately deductible. Take the percentage of the rented portion (usually 50 percent) of all these expenses against the rental income on Schedule E. This includes gardening, exterior painting, plumbing and electrical repairs, pest control and any other expenses or regular maintenance that affect the entire property. Any work done on the rented unit itself is 100 percent deductible.

Larger projects, such as major improvements, fences, landscaping and other projects that add significantly to the property's value, are deductible at the same percentage as repairs and maintenance, but they are usually capitalized and depreciated over time. Calculate the allowable depreciation expense each year and take it as as an expense against the rental income on Schedule E.

Calculating Depreciation
The rented portion of your duplex is fully depreciable. This means you must calculate the basis (your purchase price plus expenses of the purchase) of the building portion of your duplex, then calculate the percentage of the rented portion. For example, assume a purchase price of $400,000. Check your property tax bill to determine the percentage that applies to the building. Let's say it is 75 percent of the value, or $300,000. If the rented portion is the same size as your personal living space, you can take half of the value on the depreciation schedule ($150,000). The rental potion is depreciable over 271/2 years, so your depreciation deduction is $5,454 each year.

Calculate major improvements to the entire property at the same percentage. Improvements that affect only the rental unit portion are 100 percent depreciable.

I hope this helps

Yes, as long as you are living in it 2 out of 5 years preceeding the sale date. The legal ownership is not as important as your residency status on the house.

Home address is fine since this is not a public domain. You dont want to use your home address anywhere that has the potential to make your information public. And with google maps, makes it a lot easier to locate you

Call Ola at Soteria Services 678-799-7861. She has a real estate focus

You should be okay going ahead with your 2011 tax return except of course remembering that the accumulated depr on those properties will need to be adjusted based on the amended return. If the IRS does not accept it, it really does not affect the current year except of course you would have planned to include a true-up adjustment on the 2011 tax return for the changes not accepted on the 2010 tax return. I hope this helps

Generally, self-charged interest income and deductions result from loans between you and a partnership or S corporation in which you had a direct or indirect ownership interest. Certain self-charged interest income or deductions may be treated as passive activity gross income or passive activity deductions if the loan proceeds are used in a passive activity.

Here is the IRS's position: To the extent that a taxpayer receives interest income with respect to a loan to a pass-through entity in which he has an ownership interest, such income should be allowed to offset the interest expense passed through to the taxpayer from the activity for the same taxable year" (H.R. Rep. No. 841, 99th Cong., 2d Sess. II-147 (1986, reprinted in 1986-3 C.B. 147))

It's whether we want to show the company as highly collateralized or with high equity. Showing a loan has a certain of protection in that debts need to be satisfied first before anyone else is paid off which includes this loan. Having it just as equity means that if there are any lawsuits, you the member is out whatever you invested.

I look at both scenarios for my clients and decide which is the better option. Just remember that with the actual expenses, you will need to allocate only a portion of those expenses that relate to the business.