1031 Basis Of Replacement Property Depreciation
Does anybody know if that basis has to be used as is.... or ....
if the value of the land of the new property get deducted for depreciation just like the purchase?
In other words... does the basis of replacement for the form 8824 have to be the depreciated figure or do you depreciate minus the land value.?
W O W !!
And Thanks!! My head is certainly spinning!
I think you said you use one of the tax programs for your taxes. Does it actually compute this for you? I use TaxAct.
How do you keep track or set up your schedules to monitor and keep track / records over the years for this? Any suggestions? I have no problem with the basic schedules, but this is getting complicated and harder to keep good track of (after I actually compute exactly what my figures will be!) Any ideas or software or excel spreadsheets appreciated!
Thanks again, Kid!
CS
I use TurboTax. TurboTax will compute the cost basis for the replacement property pretty much as I outlined. TurboTax does not migrate the depreciation schedule from the relinquished property to the replacement property.
I have to enter the depreciable assets for the replacement property. When TurboTax asks for the assets for the new rental property I just put in service, I enter the OLD BASIS, using the acquisition cost, land cost, and acquisition date for the relinquished property. I add NEW BASIS to the schedule as a new asset and enter the replacement property acquisition date, and amounts allocated to land and structure.
[ Edited by NewKidInTown3 on Date 04/07/2009 ]
I moved your directives to an excel format and am working thru. Few more questions, now that I am almost finished. I cannot tell you how much I appreciate your guidance. I have been working w/the IRS instructions and other sites on and off for almost a year.
Few questions remain:
1. What happens to the land allocation on the sold property?
2. If you took 50K out, can you allocate to costs? If not, where does it go?
3. If you did a rehab and did not depreciate the costs (40K), then did the 1031 of that property, where do you add in that amount to basis? Or could you/should you continue to hold out until a sale?. I normally only depreciate the original purchase cost.
4. Also must you or should you add in refi/cost to sell/costs to buy costs somewhere or wait til sale?
Thank U!
Fantastic answers and help. THANK YOU!
I really appreciate your ability and willingness to explain in a clear and logical manner.
I am amazed that I stumped you on one. It actually makes me feel a bit better about the fuzziness I feel in getting this all done and clear.
I wish I was not still working on this! My computer has been hating these returns.
~~I will finish tomorrow, I will finish tomorrow, I Will Finish Tomorrow~~
Ce
I am in the same Boat here in Dallas.
Have about 10-15k to start up.
Registered with The State a LLC, last year
Havent bought any properties, I am looking for small 5+ units. I also have about 20-25k worth of credit
Do not really know where to go from here.
I studied quite abit of 5+ units. Anyways, guess I m gonna have make sure my numbers are right and just go shoot out some offers
Be in touch and hopefully we can encourage each other along the way as well as exchanging opinions and such
You can conduct your real estate activity under a DBA or within an LLC. The two are not interchangeable.
If you do business as a DBA, you are a sole proprietor so co-mingling is not an issue. Just the opposite if you conduct business within an LLC.
Its okay but make sure it is not mis used.
Yes, your loan was comprised of principal & interest. If you were current, then it should be principal only. If you werent current, then it would be principal & interest.
Interest on newer loans are about 95% of the payment. So your 1099 should show interest and principal income depending upon the sales price on the short sale.
Thanks for the reply. Any idea if the lender can add late fees, broker commission, escrow fees, title, settlement fees, basically every fee that was charged to complete the short-sale of the home? I suspect my lender has added more than interest and principal on the forgiven debt.
That sounds excessive to me. I would do more research about that.
Most likely, your 1099C does not include fees, commissions, attorney fees, and any other costs incurred by the lender in completing your short sale.
These costs were paid out of the proceeds of the sale. Whatever was left over from the short sale proceeds was applied to your loan balance, to include arrearages. I am guessing that after all the short sale settlement costs were paid and arrearageges covered, your remaining loan balance was the amount reflected on the 1099C.
What happened in 2009 that brings up this issue? You have already filed your 2007 tax return, right? Is the IRS challenging your tax treatment of the 1099C income?
More detail about your loan would also help. I am guessing you got construction-to-permanent financing to build your home. If this is the case, once the home was completed, you should have converted the construction loan to permanent (owner occupied) financing when you moved in and established the property as your primary residence. Did you do this?
If so, then I would guess that you are covered by the Mortgage Relief Act. If you did not convert the construction financing and never moved in, then I would guess that you are not covered because the property was never used as your primary residence.
[ Edited by NewKidInTown3 on Date 06/06/2009 ]
The issue in CA would be "us".
if the LLC owns the property, and you have 100% of the LLC, you could grant it to you (not you & wife).
Do community property law obviate this problem?
e.g. you are you and your wife..
apparently the IRS does not immediately flag this.
The 1st yr I filed my LLC I had never heard of a disregard entity and turbo tax let me too file the 1065.
sounds like there are 2 members to the LLC.
Whatever ratio they own the LLC, they would own the same ration after the transfer.
Quote:
On 2009-01-10 19:04, cjmazur wrote:
sounds like there are 2 members to the LLC.
Whatever ratio they own the LLC, they would own the same ration after the transfer.
that makes sense...but are there any tax consequences in doing a transfer? Does that transfer have to be at FMV and, therefore, incur capital gains? Or is it a non-event?
many states allow for the transfer w/o being reassessed is the ownership ratio is the same.
Cheap w/ a CPA or atty
what about the IRS? ... will I incur capital gains taxes with a transfer?
thanks[ Edited by buyerjohn on Date 01/11/2009 ]
for such specific advise, you really need to consult a professional or the IRS directly.
anybody else?
If a 2 member LLC transfers property to the same 2 people individually, does it have to be at FMV and, therefore, incur capital gains? Or is it a non-event tax wise?
John.[ Edited by buyerjohn on Date 01/11/2009 ]
There is the State and Fed tax component.
get a wage and income transcript from the IRS (too early for 08 as I understand). It will show the 1009 if it was sent to the IRS. if it was file an amended return and include it.
Only thing that matters is if the home had been your primary residence when the short sale occured. Since, the property was not your primary residence, then in my opinion, the Mortgage Debt Relief Act of 2007 does not give you any tax relief from the forgiven debt.
Your only other alternative to avoid taxation is insolvency. Since you have also determined that is not an option, the forgiven debt is taxable income. Does not matter whether the property would have been investment property or a second home.
Maybe your tax accountant can negotiate a discounted payoff. I would still hold the accountant liable for the penalties and interest if they are assessed (that is why they have insurance to cover these situations).