I'm brainlocked & need some help. - Posted by The Baze

Posted by RR Smith on June 04, 2000 at 23:32:06:

Must books and knowledgeable CPA’s will answer the questions that JohnBoy posted
(expect LLC question), also experience and 3 or 4 deals…
Then your question list will start to look like the one that Neil (go blue!) Roseman posted
which are handled ( cussed and discussed) on this board (especially the LLC question). I have ventured for on a couple of them below (i am still not real clear on the vacancy, thing but, sure wish i was wrong!).

Is there any tax deductions for a potential rental property that is sitting vacant?

No, the OPPORTUNITY cost of your property sitting vacant, is a personnel experience write off YOU take when you have raised the rents past the (average) market. You can NOT deduct money you could have lost, or money you should have lost, or money you would have lost (coulda, shoulda, woulda, isn?t that were that old expression comes from?) You can deduct any money you spend during that time on maintenance and improvements, advertising, marketing, manager recruitment (my be a good idea for high vacancy property), phoning your RE agent to SELL, etc?which leads into my next question?

What type of things have to be depreciated vs. being written off as an expense?

Improvements (an official IRS term) are usually depreciated for max tax write offs OVER TIME. Most maintenance expenses are written off in the year incurred. It will be a judgment call most times which way you should go. Example: I have a fiberglass roof that is worn out, and am going to replace it with 26 gauge metal roof, (clearly an improvement) more hurricane proof (class 5, probably not 6). You could go either way, write the whole thing off as a maintenance expense or, write it off as a IMPROVEMENT and MARC depreciate it. There are IRS guidelines on what is an improvement (not a generic word as used here) that I recommend that you follow.

I’m brainlocked & need some help. - Posted by The Baze

Posted by The Baze on June 04, 2000 at 16:57:38:

I have been asked by my local real estate investment group to write a tax article for their newsletter. No problem, I say. They asked that the first issue be a Q&A type of thing, ask a question and give the answer. Have you ever had so many possibilities for something that you get brainlocked and absolutely couldn’t think of even one? That’s where I am. I’ve come up w/ one so far: How long do you depreciate a rental house? Boring. We’re talking mostly novice and early intermediate level investors here w/ a few experts. So, how bout y’all give me some real estate tax related questions that I can throw into this article and answer. Hell, maybe I’ll even tackle it here. Help me out folks. Thanks.

Tom Bazley

P.S. BTW, it’s due tomorrow.

Re: I’m brainlocked & need some help. - Posted by JHyre in Ohio

Posted by JHyre in Ohio on June 05, 2000 at 11:02:03:

Baze,

Let me know if you wanna coop on some of this…I’ve been thinking about doing the same thing. Sounds like there are beaucoup questions…

John Hyre

Hey Baze… - Posted by soapymac

Posted by soapymac on June 05, 2000 at 08:10:12:

All the posts below have excellent questions. When you write your answers for the local REIA, how about posting the same answer here?

What a way to contribute!

Roy MacLean
"soapymac"

Re: I’m brainlocked & need some help. - Posted by chris

Posted by chris on June 05, 2000 at 03:37:43:

Tom-

For beginning investors -

A good area I think would be utilizing the personal residence capital gains exclusion to buy a run down property to live in while you fix it up. Live in it two out of five years and sell it after rehab-then on to the next one. See the 1997 Taxpayer Relief Act as well as IRS pub 523.

Self Directed IRAs for RE investments seems like another good topic.

One last thing that comes to mind would be a reminder of all of the tax breaks they get for their personal residence. The Mortgage Credit Certificate(MCC) would be an interesting area to cover allowing qualifying first time homebuyers to benefit from a mortgage interest tax credit of up to 20 percent of the mortgage interest payments made on a home (it varies by area). The MCC credit is available each year you keep the loan and live in the house purchased with the certificate. The credit is subtracted, dollar for dollar, from the income tax owed. For example, if you paid $10,000 in interest, your tax credit would be $2,000. The remaining 80 percent of the interest–$8,000–is taken as a typical mortgage interest deduction.

Good luck on your article, Chris

Re: I’m brainlocked & need some help. - Posted by Stew (NE)

Posted by Stew (NE) on June 04, 2000 at 21:24:42:

If you decide to give your real estate broker a finders fee, How is that handled on your tax form? Does he have to give you a receipt?

I still don’t see how this Roth IRA is such a great deal. Can you shed some light on it from a Real Estate Investor’s view. Why would we want to lock our money up until we retire?

Re: I’m brainlocked & need some help. - Posted by BR2

Posted by BR2 on June 04, 2000 at 19:34:59:

How about the 1031 exchange.

Re: I’m brainlocked & need some help. - Posted by Neil Roseman

Posted by Neil Roseman on June 04, 2000 at 18:31:54:

Using a lease option, how is the option money and the rent credit dealt with in terms of taxes?

What are the tax differences between the different entitities, trust, LLC, SCorp, C-Corp, etc?

What exactly has to happen to do a 1031 exchange?

What are the tax consequences of Holding a note? A partial note?

Re: I’m brainlocked & need some help. - Posted by Paul_NY

Posted by Paul_NY on June 04, 2000 at 18:11:14:

Is there any tax deductions for a potential rental property that is sitting vacant?

What is the difference between an improvement and a capital expense?

What tax books can you recommmend for real estate investors?

Re: I’m brainlocked & need some help. - Posted by JohnBoy

Posted by JohnBoy on June 04, 2000 at 17:30:55:

What type of expenses are deductable on rental property?

Does rental income have to be claimed as income?

How long after the sale of an investment property do you have to reinvest the proceeds into another property to avoid any tax?

What type of things have to be depreciated vs. being written off as an expense?

Can income from a job be offset against losses on an investment property? What type of things can be shown as losses?

What are the best entities to use for avoiding taxes with investment properties? LLC’s, Corporations, sole proprietor, etc.?

Is all the interest deductable on mortgages against investment property?

Can you deduct loss of rents from vacancy’s?

What type of ways can you deduct your auto as an expense for being used to find, service, etc. your properties?

What would be the simplist way to just abolish the IRS??? LOL

Re: Hey Baze… - Posted by The Baze

Posted by The Baze on June 06, 2000 at 19:17:05:

Roy,

I’m going to try & tackle this weekend. Not enough time before then.

Tom Bazley

Where’s the Answer Sheet? - Posted by Monique

Posted by Monique on June 04, 2000 at 19:24:31:

John,

You’ve got an impressive list there. It’s clear I need to study more, because I could not answer many of them.

In addition to a CPA who actively invests in real estate, where would you recommend I go to get answers to many questions like these? A book you recommend, an audiotape, an inside connection to an IRS bigwig, …?

Thanks,
Monique