All Forum Posts by: Account Closed

Hey Brad, given that this is the Tax, SD, IRA, and Cost Segregation forum, banks can't promote themselves as that is against forum rules. I highly suggest you post your request in the classifieds, you may have better results

Hey Magda, as accountants on BiggerPockets, we're not allowed to self-promote (that's against the forum rules). I'd highly encourage you to reach out to folks providing value to other people in the forums and see if they're accepting clients at this time. Best of luck.

Hey Patrick, 

Please keep in mind that land itself isn't depreciable. To determine the land value for depreciation purposes, you can use fair market value instead of the county's assessment if it's unreasonably high. In your case, with land selling for $8,500, $10,000, and $29,000 in the area, it’s reasonable to use these comparables to allocate the land value. You can average the amounts or use the higher $29,000 figure if it reflects market conditions, as long as you document your methodology and provide evidence, such as sales data or an appraisal. This approach maximizes the building value for depreciation while remaining defensible to the IRS, minimizing the risk of flags.

* This is not tax advice

 Hey Kevin, 

You're correct that in a Roth IRA, the tax advantages of depreciation, such as offsetting taxable income, are effectively lost since the account itself is tax-free. Depreciation is valuable to investors with taxable income, but in a Roth IRA, any income or gains are already shielded from taxes, so the benefit of depreciation deductions isn't needed.

As for shifting depreciation to another partner in a syndication, the IRS generally does not allow the reallocation of depreciation solely based on which partner can better utilize it. Depreciation is typically allocated according to the ownership percentages outlined in the partnership or syndication agreement, which are set in advance and follow certain rules under the tax code.

However, some syndication structures can be designed with different classes of partners or special allocations, but these arrangements are subject to complex tax rules, such as the "substantial economic effect" rule under Section 704(b) of the Internal Revenue Code. It's essential that any such allocations are supported by actual economic arrangements, not just for tax purposes.

As for compensation, it's theoretically possible to negotiate a different economic arrangement within a syndication if another investor finds the depreciation valuable and you don't need it due to the tax-exempt status of your Roth IRA. However, structuring this in a way that complies with tax law would likely require expert legal and tax guidance, as it involves partnership agreements and IRS regulations.

Hey Spencer, 

As of 2024, bonus depreciation is still available at 60%, but it is set to decrease to 40% in 2025, with further reductions planned for future years unless Congress takes action to extend or change the law. There was a bill in Congress aiming to extend or modify the bonus depreciation provisions, but no definitive changes have passed yet. To prepare for maximizing bonus depreciation or conducting a cost segregation study, you can begin gathering detailed records of the property's assets and improvements, coordinate with a cost segregation specialist early, and consider any renovations or purchases of eligible equipment to align with tax strategies that take full advantage of the current bonus depreciation rates before they phase out.

Hey Nathaniel, no worries, happy to help. That is a great question. Depreciation is going to still be offsetting cash flow quite a bit - when you accelerate depreciation, it doesn't technically do absolutely every depreciation item in year one, so there still is going to be quite a bit of depreciation to offset your cash flow.

Hey Nathaniel, 

In this scenario, when selling the property for $800k, depreciation recapture would be a key consideration. The cost basis is the $700k purchase price plus $25k in renovations, totaling $725k. The cost segregation study generated $80k in passive losses, meaning a portion of that would be recaptured as ordinary income (at a 25% federal rate). The difference between the sales price ($800k) and the adjusted cost basis ($725k minus $80k of accelerated depreciation) is $155k. The $80k of depreciation recapture will be taxed at 25%, and the remaining $75k capital gain will be taxed at the capital gains rate (likely 15-20%). Your combined personal tax rate of 30% could apply to state and federal taxes depending on jurisdiction. A 1031 exchange could defer both capital gains and depreciation recapture taxes if you reinvest in another like-kind property. Depending on if this is your primary residence or not can alter the strategy but that's the gist. Also keep in mind the basis to deprecate will likely be lower as land value would need to be considered 

Hey Jeff, this definitely looks like something worth inspecting as a 2.5x is quite large. I would recommend reaching out to a local real estate attorney for the best advice.