It’s never a good idea to gift things to somebody. Instead, make them work for it. Take care of yourself, your family, and your taxes. Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

How do I gift my son a fully depreciated rental property without causing a tax consequence? Typically, gifts do not cause tax consequences; however, it is not always wise to do so

We are considering purchasing a vehicle, which will be used about probably 75% of the time for our real estate business. Should we purchase it in the LLC (an S Corp) or personally? What are the advantages and disadvantages of both? Consider liability, tax consequences, cost factor, and value of vehicle; unless it’s a maintenance or utility vehicle, put it in your personal name and get reimbursed for the mileage because commercial insurance is much more expensive

Excluding the 1031 Exchange, is there any way to legally avoid paying depreciation recapture tax when you sell a rental property? Don’t have a gain on your sale

I have several vendors refusing to give me their W-9, and I have to threaten to withhold payments. When should I collect and not collect W-9? Vendors need to complete the W-9, but you are not required to issue them 1099s—although you should anyway

Can we sell our home on an installment sale to an Intentionally Defective Grantor Trust (IDGT) and then lease it back? And at the same time, have the depreciation and other costs flow to our return because of IDGT taxation rules? IDGT is an irrevocable trust that is not actually irrevocable because of adding ‘Grantor’ wording to make it intentionally defective for tax purposes

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Resources:

Tax and Asset Protection Workshop (Free 1-Day Virtual Event on Feb. 27)

http://aba.link/TAP227

Wills and Trusts

https://andersonadvisors.com/living_trusts/

MileIQ

https://www.mileiq.com/

Real Estate Professional Requirements

https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf

Doing Business As (DBA)

https://www.entrepreneur.com/encyclopedia/doing-business-as-dba

Entity Formation

https://andersonadvisors.com/entity_formation/

1031 Exchange

https://www.irs.gov/pub/irs-news/fs-08-18.pdf

Bonus Depreciation

https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act

Depreciation Recapture

https://www.investopedia.com/terms/d/depreciationrecapture.asp

Form W-9

https://www.irs.gov/forms-pubs/about-form-w-9

Intentionally Defective Grantor Trust (IDGT)

https://www.investopedia.com/terms/i/igdt.asp

Section 121 Exclusion

https://www.irs.gov/taxtopics/tc701

FHA Loan Requirements

https://www.fha.com/fha_loan_requirements

Capital Gains and Losses

https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0

Form 1099

https://www.irs.gov/forms-pubs/about-form-1099-misc

Retirement Plans

https://andersonadvisors.com/retirement_plan/

Self-Directed IRA (SDIRA)

https://www.investopedia.com/terms/s/self-directed-ira.asp

Unrelated Business Income Tax (UBIT)

https://www.irs.gov/charities-non-profits/unrelated-business-income-tax

Conservation Easements

https://www.conservationeasement.us/what-is-a-conservation-easement/

Solar Investment Tax Credit (ITC)https://www.seia.org/initiatives/solar-investment-tax-credit-itc#:~:text=Quick%20facts,large%2Dscale%20utility%20solar%20farms.

Taxpayer Certainty and Disaster Tax Relief Act of 2020

https://www.finance.senate.gov/download/section-by-section_-taxpayer-certainty-and-disaster-tax-relief-act-of-2020

Step-Up in Basis

https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.