@Paul RyanGoing to try and answer to the best of my ability but I am not a cpa or a lawyer and can’t give legal or tax advice.Typically you are not able to offset the depreciation recapture tax. A

Also, since the real estate is held within the Roth account and has already been taxed, I am not sure you need to take 25% off the net rents for income tax as long as it stays within the Roth (though don't quote me on that, haha).Regarding your underlying assumptions.

This income will be subject to SE Tax. As

This type of transaction pushes off the capital gains tax as the money is reinvested into a similar property (i.e. another commercial property).

regular MLS Can you post all your numbers e.g. total purchase price as per your closing statement, cost to add the ADU, mortgage payment principal and interest, rental income from the ADU, are you renting the house and ADU, or are you living in the house, property taxes, insurance, did the county increase your property tax as a result of adding the ADI and how much, etc.?

My take on this is to invest in real estate like a drunken sailor in the dips, as real estate becomes more expensive throughout the recovery save as much money in your ROTH and pre tax as possible and buy mortgage notes and do hard money lending deals and save cash for the next collapse.

More here: http://www.advoco.es/advice/8-personal-tax/75-taxa...On the topic of taxes, if you intend to relocate to Spain and work here as an employee of a Spanish company, it's worth reading up on the Beckham Law.

DEBT Is good as long as I control it FOR MY ADVANTAGE and it doesn't control me.Some people can't use debt in a productive way so it's best they do not have it at all.It's the similar argument for people who claim less dependents on the taxes so they have more taken out each year for a bigger check for them later. ( a forced savings plan for those with little impulse control).Conversely there are those who say pay as little tax as possible and do not give the government an interest free loan and make more money investing it before the taxes come due.It's like paying off your house.

Basically Schedule E is a way for people to claim incomes from rentals without also paying self-employment tax - a good thing.

If I have my builder do it, I would have paid tax as it is related to building.