September 05, 2023

When Is the Best Time to Conduct Cost Segregation Studies?

1 hour 6 minutes

We’ve reached quite a milestone - our 200th episode! For today’s Tax Tuesday, tax experts Toby Mathis, Esq., and returning guest Jeff Webb, Esq., CFO of Anderson Business Advisors share their expert advice on tax strategies and navigating economic uncertainties, with a focus on rental property and financial diversification. You’ll hear about the complexities of non-recourse loans and taxation, myths and strategies for day traders, taxes on land flips, the best time to do a cost seg, and more. Three lucky listeners will receive copies of our ebook in the episode. Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

Is there a minimum net income where it would be beneficial for a single-member LLC to file as an S corp rather than a disregarded entity? - It depends on individual circumstances, but if your income is quite low, you may be able to save a bit if you file as an S-corp.

Can my rental income be directed into a self-directed IRA and what are the advantages to doing that? - Yes, rental income can be directed into a self-directed IRA which offers several tax advantages.

I don't understand the difference between owning rentals as a real estate professional (REP) or non-REP. And what, if any, disadvantages are there when buying a rental inside a Solo 401k using a non-recourse loan? - REP status offers tax benefits, while non-REPs face limitations. Buying a rental inside a Solo 401k with a non-recourse loan can limit potential deductions.

How is the land flip taxed? Does land have to be held for a year like a house? - Land flips are taxed as ordinary income and there is no requirement to hold for a year.

Is it acceptable for the IRS to trade futures from a 501c3 or a family foundation entity? Does the entity need to pay capital gains? –Yes, futures trading is allowed but can carry unrelated business income tax implications.

If you form an LLC for rental property, is it best to report the activity on Schedule C or E? –Generally, it is better to report rental activity on Schedule E for tax purposes.

When is the best time to do a cost segregation study? – The best time is usually after renovations are complete but it depends on individual circumstances, some you don’t have to wait on, like a pool.

We fix and flip luxury homes and are thinking about keeping some to rent. We have held some in the past. We have an LLC but the accountant is saying to go to an S corp. - we disagree, investment property should not go into an S corp, it should go into a land trust/LLC.

We are setting up a family trust in Florida and watch your video about trust Wyoming. The attorney says we don't need Wyoming, is this true? – The WY trust is a revocable trust. If you’re working on a living/grantor trust, your attorney is correct. Transitioning to an S corp may provide tax benefits.

What is the best way to pay my children who actively trade in our fix flips bookkeeping? – Consider establishing them as employees and paying them a reasonable wage for their work.

I understand anyone can gift to anyone in a year an amount not to exceed $17,000 per person. Can I gift from a family limited partnership Units not exceeding that amount, giving them a percentage of the LP units each year? Does it avoid the generation-skipping tax? – Yes, but your gift from your interest in the LP…it can be a viable strategy for tax purposes.

Send us your questions, and check out the event schedule listed in the resources section.

Resources:

Infinity Investing

https://infinityinvesting.com/

Email us at Tax Tuesday

[email protected]

Tax and Asset Protection Events

https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=aba&utm_medium=podcast&utm_content=when-to-conduct-cost-segregation-studies

Anderson Advisors

https://andersonadvisors.com/

Anderson Advisors on YouTube

https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw

Toby Mathis YouTube

https://www.youtube.com/@TobyMathis

Toby Mathis TikTok

https://www.tiktok.com/@tobymathisesq

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