How to Write Off Your Vehicle Exclusively for Your Business | Tax Tuesday #171
all right and welcome to tax Tuesday my name is Toby Mathis and I'm Jeff Webb and uh we're bringing tax knowledge to the masses as best we can let's see if we can do it uh today we have a whole bunch of folks in uh on as well to answer your questions you don't see their faces but I know for a fact because I can see them that we have Matthew Patty Elliott pyo Dana Troy Ian I'm trying to think if there's anybody else on that I'm missing probably but uh we got a whole bunch of folks on to answer your questions if uh if you're wondering whether this is live you could test it by going into chat and asking to see if somebody responds to you and no it's not an autoresponder you could ask questions here's the rules uh uh we have two ways you can respond back number one is the chat which is if you just have comments but if you have specific questions go into tax the the little thing that says q a at the bottom so that's your question and answer and the reason that we do that is because uh we have sometimes up to a thousand people on these live and if we have everybody answering a question in chat it just goes flies right on by us so if you have a question by all means put it into the Q a uh if you have questions during the week go to tax Tuesday at Anderson advisors that's where we pull our questions which we'll be going over today that's where we grab uh we usually grab between 10 and 15 of them every week or every two weeks and for every session that we do a tax Tuesday we will go over those and that's what we do because believe it or not a lot of those questions create more questions they become good learning experiences uh this is Fast Fun and educational we try to give back because we know that it's no fun to ask a question of your tax person and have them bill you three four five hundred bucks an hour sometimes even more uh it's crazy uh lots of good questions that are already popping in I think that our guys will just be answering those uh uh I just submitted a capital gains question we're gonna hear what you do is put it on in there Arena and our guys will get back to you while we're in here so let's jump in uh first off here's the questions we're gonna be going over today what I like to do is read them and then we will go over them one by one so I'd like to go over all of them so you see what's coming up and the reason that we do that is because we want you to see all the different questions so you can see what's relevant to you so you can stick on if you see something that's awesome if you're pressed for time you can go back and watch the recording but you know that it's going to get answered so we always go through these the opening questions during the uh during the session all right so let's start off I have an LLC but I want to know if I need one for each of my properties that are short-term rentals so we'll answer that one uh here in a little bit I have an investment property a house that is paid off and I would like to transfer to my son who's currently living in it with his family what is the best way of doing it to eliminate the tax consequences to him and I I'm 67 and my son is 33 years old so we'll hit that one too how many years can you go back to look audit your tax returns we had a significant loss of business but still owe taxes for three years my husband insisted we use H R Block and I think they screwed up the odds are in your favor uh so we'll go over that um we're evil here we there's actually a really good study that was done on Jane prepares and they were wrong 100 of the time on business returns so I again I say the odds are pretty good that they did so hopefully we can give you some uh some goodness I started a roofing business in 2020 and I only did one roof for 7 800 but I paid the roofer 6300 and 1200 for Supply so I'm going to add addition in my head it looks like it's about 7 500 bucks so you made a tiny little bit I was told that if you made under 100K you you did not have to file um I started the LLC in January of 2020 what late fees do I have to do I have to file for 2020. so we'll try to bring you some resolution to that hopefully some of these folks are on and we could ask them questions uh currently trading options in normal non-tax Advantage brokerage cats currently paying fifteen hundred to three thousand dollars a month in trading commissions and fees I've tried no fee platforms but their fills are horrible and potentially unable to close positions equals more costly than paying commission for faster fills question one like to be able to write off these fees to ask that question question number two how to make this trading income active instead of passive for further tax benefits so you're thinking of it like a business good questions we'll get to that I started a business last year setting it up as a C Corp I invested approximately 180 000 is the franchise fees Equity injunctions or injection Etc what are the different ways to get the tax benefit while reimbursing myself should I leverage a 1202 qualified small business stock is what that means qsbs is that only applicable at the sale of the business can I still reimburse myself for Equity I'm glad that you're asking these questions we'll give you some clarity here uh I bought a rental property on looks like December 8th of 2021 the renters signed the lease on the 24th of December I had intended it to start on 1-1 2022 but because of a state law the least started on the signing date and ends on 12 31 2022. no rent was paid until January when is the property considered placed into service when do I start depreciation I did I didn't have any income in 2021 so would the depreciation carry forward great question so we'll get into those can you talk about writing off a new truck purchase for use exclusively for my business and what are the tax benefits of having real estate professional status nothing like open-ended questions that we will get into Jeff loves these because he likes to explain things right when my Wyoming holding LLC my Wyoming my Wyoming holding LLC owns another domestic LLC of mine that is an active business both single member llc's is a licensed insurance agent to both llc's have to file a tax return and if so will active one flow into holding one which then flows onto my personal so we'll we'll dissect that I have heard Tobin talk about uh benefits of cost segregation I'm just going to add a word in there to make it understandable I've heard Tobin talk about the benefits of cost segregation I've tried to read more about it how do you cost segregation analysis on the IRS website they talked about construction blueprints construction engineers and construction budget if it is part of a construction project for a new building how do you get the analysis done if you purchased pre-owned property do you hire a firm so we'll dive into that we'll go over what the requirements are uh last question that we're going to be going over I operate my business out of my home and want to rent the home to my entity so I can write off the mortgage rental expense as a business expense and use a primary residence loan to purchase a new home can I achieve this by writing a lease to my business how can I go about this so great questions today we will dive into all of them speaking of which you might be watching this on our YouTube channel which we do with these as YouTube live uh or you may be watching it as part of a zoom call either one works but if you are on the YouTube channel you'll see that we have a ton of other content including previously recorded uh tax Tuesdays we also do a a lot of videos on specific Topics by all means please hit that subscription button you can just do the little subscriber it's up in the right corner you see a little finger on it right up there it's kind of halfway cut off but if you go to the actual YouTube this is the ABA dot link forward slash YouTube you can see the link there somebody might share it there you go Patty already did it she's way ahead of me uh you just click on it and subscribe and then you're notified whenever a new video comes out it's not going to spam you it's just going to say hey new video was put up on X and if you want to watch it go watch it if you don't save it for later um here we go you ready Jeff I'm ready all right I have an LLC but wants to know if I need one for uh for each of my properties that are short-term rentals Jeffrey what do you say I say need is a very strong word here you don't need one for every uh short-term rental uh if you can do it I I think it's a great idea to have one for every rental but you don't have to have this yeah that's fair I think I think it depends on where you are in life so here's what I would say uh from a risk reduction standpoint you want to make sure you keep your personal Realms separate from your Investments and the risk associated with businesses or investments in other words you don't want to have a a short-term rental by the way means an Airbnb or a BRBO it's just a rental that is going to be seven days or less and it's considered an act of business so if you have an accident on one of your properties I'll use a real life example somebody was in a swing the branch broke the branch came down and killed the individual that was on the swing right horrible situation stuff like that happens though and if you're a VRBO it could be somebody following down your stairs it could be somebody drowning in your hot tub whatever just fill in the blanks there's bad things that could happen or injuries isolate that from your personal realm and the way you do that is using a limited liability entity like an LLC around the property now if you're just getting started out you might have one two or three I would strongly recommend that you isolate each property because each property could create liability for the others so for example Jeff here has a bunch of Investments and he's gone through life and he's got his accumulation he may be in a different circumstance than somebody who is just getting started out Jeff could afford to lose a property or two and it's probably not going to change his retirement but if you're just getting started out it could really suck if you have two properties and something happens on one and they take the other right so for that person I would say isolate them from each other best practice is to isolate your liabilities but I'm not going to sit here and tell you if you have 100 properties to have 100 llc's it becomes a very different situation if you have three three properties you might want to put an LLC around each one if you have 300 you're probably going to be okay grouping them 20 30 properties per LLC because you're like hey I'm not going to worry about it if I lose it so how do you feel about uh let's say I have a property in California one in Florida and one in Massachusetts I would isolate those isolate those I think when it comes to them being on separate states you probably want the llc's to be in those specific States and you could have them all flow up into a holding so that you have one tax return federal tax return you might have a state tax return which is easy to do uh but let's just say that you have separate llc's in different states and now you know hey this is the worst that's going to happen is they take the stuff in that state what you don't want is to find yourself getting sued over and over and over again because of An Occurrence on one piece of property and I've actually seen it one of my things that opened my eyes was I had a client this is 25 years ago and she was in a course and she said she had already gone through it she lost 15 pieces of property and she said it was like Domino she had a liability occurrence on one and they ended up going through and taking everything including her personal residence anybody tells you that they can't take your personal residence it's a state-by-state issue and in some states there's literally like ten thousand dollars of protection once that liability has happened anything you do after that's a fraudulent conveyance they can undo it but for the most part they just start bulldozing right on through all your stuff so you just isolate it it's not hard really simple that's what we do at our firm day in and day out and so best practice I would say the best practice is to have your properties isolated if there's too many properties you don't want to isolate it at least strip the equity out so that if somebody sues you they're going after a smaller Target in other words if there's debt against it and you take the cash out and put it someplace else at least that's safe and uh and just again just make sure you're doing so with your eyes open yeah you don't want to get caught with I got a million dollar property Malibu a million dollar property in Destin beach and I got a hundred thousand dollar property in Dayton Ohio all in the same LLC something happens to the Dayton property and I lose yeah or anything else and that's exactly what what could happen and as we've seen over the last two or three years we've had really high appreciation now just tell you you're going to hear a lot of things on the news about the cooling or the crash or the bubble that's going to burst here's the thing this isn't a typical 2020 2008 where we have we're overbuilt we have too much inventory and there's liar loans out there and people can't afford it we have really low unemployment people are servicing their debt yes affordability is going down and it's going to cool the market which means stuff that would have flown off the shelves now people are going to have to stop and go oh it's getting a little more expensive and maybe they're not as bidding wars I don't see the market crashing as a result this was self-inflicted wounds we we created what seven trillion dollars of debt of our debt in a about a year and a half it took us 215 years to reach seven trillion dollars of debt the first seven trillion and then we just did it again in a little bit over a year we are printing money like crazy which is causing inflation that's a self-inflicted wound the FED is going to try to stop it but it's not normal inflation we did this this isn't Market forces doing it it's supply chain because we shut down because we had a pandemic it's we devalued things because we printed so much money it's not it's not the economy that did it this is this is this is us doing it to ourselves and all the raising of all the debt in the world is not going to necessarily change that we're going to just have to wait this one out you know regardless you want to make sure that you've seen massive increases in appreciation you don't want to expose it to the one liability occurrence you've had this big run-up properties some of them doubling in value tripling in value and all of a sudden you don't realize you have all this beautiful equity in there and all it takes is a robust plaintiff's lawyer getting a hold of a good set of facts and they'll try to separate you from all that appreciation you don't want to you will not appreciate the separation from your appreciation all right Jeff I have an investment property a house I like that they put that in there that is paid off and I would like to transfer to my son who's currently living in it with his family what is the best way of doing it to eliminate the tax consequences to him and I I'm 67 and my son is 33 years old what say you well there are three ways to do this one you could sell it outright to him um two you could gift it to him he would take it over at your cost basis uh in other words your investment in that property uh or three you could kind of do a combination of both you you could give part of it and uh you could sell it for a discounted value now the gifting has no tax consequences whatsoever unless that property is worth more than 12 million dollars uh what just referring to is you have an uh you have a um an exclusion for transferring an estate to somebody if you die yeah and that same amount can be used for gifting during your lifetime so what is a 12.050 or something like that yeah I think it's 12 12 million some change so it's 12 million bucks what Jeff's basically saying quite correctly is you could probably just give the house to your kid and you don't have to worry about it yeah if you're not looking to get anything out of it and you just want to provide yourself with a house just gift it to them you will have to do an appraisal on the house and you will have to follow gift tax return but here comes the miserable asset protection attorney who's seen a million of these things go sideways you said son and his family are you okay if son and family become son and ex-wife and that that ex-wife may take your house and that's the question that you have to ask yourself so it's like hey um I love I want to give this is there any chance you're going to need it are you you're 67 which means there's a look back period for uh Medicaid of what five years are you any is this going to cause you to need assistance that all of a sudden this could be a a Sticky Wicket um so what I would do if it's me unless you have a really good reason not to I'd probably do this on a you just carry a note and sell it to them uh a it's going to step up his basis and then if you don't want to get paid like you could just gift that money back so sell it at fair market value say hey pay me this but you don't have to get paid what you could do is say all right I'm just going to gift those payments to you and you're going to have a tax consequence to it you know chances are it's not going to be horrific because every year uh in theory you should be charging them rent anyway I don't know how the IRS would probably look at that they'd probably say that's a gift um if you have family members living in a property they just treat it as a personal home personal home yeah residence living yeah it's just second home so you're not getting much tax benefit out of it so there'd be if you did it like uh if it was your primary residence any time in the last five years two of the last five years that would be great you could probably avoid any tax uh on at least the gain but if it's a uh property to Second property uh you know we'd have to explore was it ever used as a rental was it user primary residence because there's some tax consequences to both of those yes but my inclination would probably be just to make sure you don't lose control of that property is to have the a debt and that way if something did happen with your son and his family and I'm not so you don't want to curse anybody he's just seeing this happen way too often where somebody is kicking themselves going I didn't know I didn't know um that at least you have you you you it's it's you could choose whether or not to continue to gift those payments to them if something happened along those lines so it's just a reality it's about a 50 50 shot I'm sorry but that's just me my horrible asset protection side of me going it's a pretty good chance it's going to happen so we should address it um somebody says if you gift your house where and who has is has the new basis when you gift an asset here I'll just you you already mentioned this why don't you just yeah when when if I gift an asset to Toby then he gets my basis so if I paid a hundred thousand dollars for a house and haven't depreciated it uh he gets the house at a basis of 100 000 even if it's worth three times that now uh it's not like when you inherit a house then you get the stepped up basis correct right so if you paid fifty thousand dollars to the house and it's worth 250 your son's basis would be 50 000 unless you sell it to them you sell it to them now his basis is whatever the sale is and again it's up to you um and then somebody says uh when the house is gifted to the sun will be reassessed for property tax it could be it actually could be uh so it's again that's why you look at these things before you just give something over I'm not a big fan of gifting assets over uh to kids just not uh because there's so many unintended consequences we see it all the time certain uh certain cultures especially you'll see it oftentimes given to eldest son an eldest son may have some liabilities lurking and I've seen that more often like more than once so so what about what what about just holding on to the asset and just letting them live there I don't know and bequeathing that house to them you could do that too that's you know here's the here we should talk about that just for two seconds the benefit of dying and leaving an asset to somebody is the Step Up in basis so he's living in the house you just say hey you know just stay in the house you can just live here that's great your son might be saying hey but I really want to own it which give him an option hey you can buy it at this you know at some point in the future but if something happens to you um something bad you know you get a disease terminal disease accident covid just you know caught a few folks something and you in in and you pass away the benefit is that you now have a higher basis so if they do sell it at some point in the future that uh they don't have to pay tax on all that increase and value they that ex that had happened during your lifetime um let's keep going on because I know we'll be here until midnight if you let me how many years can you go back to look audit your tax returns we had a significant loss of my business but still owe taxes for three years that sounds bitter it sounds like man we lost a bunch of money but we still owe taxes my husband insisted we use H R Block and I think they screwed up so I think what they're really asking Jeff is can we go back and amend these screwed up returns maybe um you can go back to the the statute of limitations is three years from the time the return was filed mm-hmm um so if you filed your 2018 return before April 15th that that has already Sunset his statutes already ran out on that that one particular Year yes if you filed it if you got an extension for that return which if you went to H R Block I kind of doubt if you got an extension for that return and filed it later in the year uh you might still be able to amend that 2018 return 2019 and 2020 are both still open to be amended yeah so if you had significant loss for three years chances are that sounds like it's 2018-19 and 20. I would imagine yeah you know so uh and then you still owe taxes for some reason they may not have I mean if you had business losses they may have treated them as investment losses and carried them forward I don't know how they would actually treat that let's say that somebody treated something as a passive loss when I should have been an active loss it really is the year that it's incurred that's going to control that right so right if you erroneously called it a passive I think you're kind of stuck with that you keep carrying it forward but uh hopefully you're able to go back and correct the situation because I'm with you if I lose money in a business it depends on the business because the c-corp is different than an S corp is different than a partnership is different than a sole proprietorship as to how that's treated on your personal return um I want to make sure and go back can't you amend after statute if you're able to reduce tax liability if they owe Bridgette no unfortunately that statute limitations is for both you and the service the service can open it up and go back seven years if you have a significant reduction of tax I think it's 10 years for fraud or is it forever for fraud um that's a good question I was thinking about six years or seven years but uh for a frivolous return I think they can go that far you can go back if it's if it's an intentional situation they don't have a statute if it's uh otherwise you're looking at that three years and it's for both you guys so let's say I'm able to help amend 18 19 20 and I got net operating losses on my tax return now now I can go back and I'm in earlier years to use that loss in previous years where I may have had income would reduce the income there what you're pointing out is that during covid they had the The Five-Year look back where you could take it back to all the way to 2015. so if you amended your 2020 in theory you could go back and carry it all the way back and start offsetting 2015. yeah
right and then you don't have to worry about a statute because you're carrying back a loss and as long as you incurred that loss so there glimmer of hope this is why you use guys like Jeff who's really really smart he's a CPA for about 78 years give or take yeah just for the CPA a long time I'm just a tax lawyer I'm just dumb I don't do retains how do we hire you right now you can't piggy ah because we're completely tied up what you do is put yourself on our list because after the tax season after October 15th we're going to re-back open and take up new clients on tax otherwise it sounds weird because you don't hear many companies do this but we're in capacity for this tax year we're not going to bring anybody in because it would do a disservice to those people that we have currently in our Hopper because we are at Max Capacity weird our guys are working their katushes off 24 7. yeah I mean if you're in a situation where you need these returns a minute go find a local CPA to take care of this for you and it's worth the paying the fees you could still come in like we still answer tax questions as part of our Platinum service yeah you could still do that but we're not going to prepare the return we just can't we just have we we already took our obligation um I mean we can look in in giggy reach out we will we will take care of you uh and make sure that we point you in the right direction and there are some folks that we do work with you know we have other associates around the country that we can point you to if we're not able to do it all right I started a roofing business in 2020 and I only did one roof that's quite the business I uh snark but I paid the roofers I paid the roofers like what you did is you you were the middle man and yeah you got you got a little bit of money they made 300 bucks I was told that if I made under 100K you would not have to file is there a statute I wish there was yeah no that does not exist unless it's you individually and what they're thinking of is hey if you make less than 12 000 bucks you're probably getting it wiped out with the standard exclusion what is it twelve thousand yeah something like that it's it's I should look at my little cheat sheets it's almost thirteen thousand as an individual that you could make and not pay any tax so that might be what you're thinking of uh whether there's late fees it's an LLC so it depends on how it's taxed but let's just assume this is just you and it's a disregarded LLC meaning that the IRS ignores it they do this oh it's just you we'll look at your return you know they don't look at the the LLC if that's the case are there any penalties uh no because I'm guessing you probably well do you think he filed his return for 2020. sounds like they didn't file anything yeah I I would just file the return uh you're not going to pay any self-employment tax on three hundred dollars uh you're not going to have any tax period but I would file this return primarily because it's business income of 7 800 and that's really what they're looking at and you need to take your expenses if you don't take your expense and they come back later and assess you could be paying tax on the 7 800 correct because they could say uh you missed your chance and then you would pay self-employment tax on that full 7 800 and you don't want that that's 15.3 yeah so that could be painful and if you have a tax liability there could be penalties and interest the penalties are capped with 25 percent yes and the interest would be about six percent a year so yeah you could still owe some money uh be it'd be annoying yeah so follow your return even if it's late people do this all the time hey I didn't file any Returns what should I do file them get a power of attorney let's look and see what income's been reported to you let's reconstruct as best we can and file your returns chances are they're not going to bug you they're going to be very pleased when I say they the treasury is going to be very pleased that you're filing your taxes that they didn't have to prosecute you or chase after you so and we mentioned statute of limitations earlier when's the statute of limitations start if I don't file my return it never starts to run they can go back and Hammer you decades later so don't do it um all right besides you don't have to like you're probably not going to pay any tax yeah you're not going to have it you're going to be out the cost of the return which isn't going to be that much all right currently trading options or learn to do tax returns yourself spend some time on the like it's a small amount you have cost of goods sold you paid somebody else to do it that's actually not cost to get sold that's technically you've paid somebody else to do it so you have that plus your materials you're going to have like 300 bucks that you netted plus you probably had some other expenses some traveling around maybe you bought a tack hammer or something I don't know but just do it worst case scenario worst case scenario you spend some time on it and you don't have then you can sleep at night currently trading options in a normal non-tax Advantage brokerage counts uh currently paying fifteen hundred to three thousand dollars a month on trading commissions and fees which means this is a very active Trader I've tried no fee platforms but their fills are horrible and potentially unable to close positions equals more costly than paying commissions for faster fill so this sounds like what I would term a professional Trader this is somebody who that speed matters because to Jeff or I I don't think it matters we're like yeah didn't get filled immediately you know most investors they're like you know they're not too worried about it he's working with the flux price fluctuation yes they're playing yes and I don't do that I'm an investor and there's a big difference I buy things to hold them forever and I buy them for their income and I'm not too concerned about I'll usually sell a put to get into a position that's a topic for another day and then I'll get called out on that eventually and forced to buy it that's great or I just get to keep the money from the put and then I don't have to do anything with it um and I do it again the next month but some people are trading these fluctuations in the market very tough to do but if that's you you're in a different category than everybody else and we'll go over that in a second question one um like to be able to write off these fees to offset income so how do they how are commissions and fees generally treated uh generally well commissions you're probably already deducting because they should be included in the your cost basis and proceeds 100 100 percent are the fees included in that too the fees are not the fees are usually uh listed separately they are not deductible to you in any way shape or form in your current format mm-hmm so basically what Jeff's saying is there's two sides to this there's hey I'm paying a commission where I could avoid all fees like on Robinhood I could buy things but then you're going to get hose periodically right so here I might be paying 500 or five bucks a trade or whatever that gets added to your basis if you create a loss as a result now we have something to worry about because that loss would be considered investment loss yep and it would be considered Capital loss which would be limited on how much I could actually deduct you can deduct up to 100 of it against your capital gains but if you lose money in the market and then you have all these fees and you have a loss you can use up to three thousand dollars against your other income including your your wages and then you carry the rest forward you know that's why people that lose money in the stock market like right now this Market is causing people to bail those losses chances are they're never going to get to take they're just going to carry them forward until they ever get back in the market make money here's a hint when the Market's doing this lose your lose your account yeah password it can go on a vacation don't log in yeah because all they're trying to do is make you do something they're fear pouring blah blah blah the best thing you can generally do is what Warren Buffett said before you know you take the right hand and stick it underneath that right butt cheek you take your left hand stick it underneath Jeff's left butt cheek you know under yours don't touch Jeffs yeah just sit on your hands guys if you have good income producing stocks if you don't have good income producing stocks um that I'm going to show you how you can learn how to pick to write stocks I'm going to show you how to join Infinity investing no I I did something a little different the market was down about 600 points early today and uh so I went in and bought some more dividend pain yeah the yields are great so but here's what I would say is nobody knows where the bottom is it could be 50 lower but when you buy the best advice that was ever given to me it's by really wealthy folks was you know when the account when it's when the Market's going up crazy or going down crazy don't open up your your statements yeah right you're buying it for the income Stream So when you buy dividend producing stocks you're buying it for that dividend and because you can sell options against it and this is a great Market be doing that because it's so volatile you can actually make some good money on it but don't be looking at the value of your company like if I have rental properties and I have 100 rental properties I don't care what I paid for them like it literally matters nothing to me how much should you pay for that hey it's gone up oh hey it's way down all I care about is how much are they paying me in rent and that's the way that we look at the stock market and then again I way smarter people than me talk about this stuff and I'm just saying that the people that are that are consistently successful especially in our client base we do over 10 000 returns a year very the people that are successful do the same thing and they don't sit here and play this jump in the market jump out of the market if you do it as a professional which leads us to question number two how to make this trading active you need to bring in a corporation into the mix and what I would suggest is that you have a trading account sitting in an LLC you're paying the fees anyway who cares if you do this through a corporation you have the corporation owned 20 30 percent you literally can just run all the money all the profit up into that Corporation and then if it pays it out to you if that's what you want to do you can dump it all into a 401k you can use it as active ordinary income it's no longer going to be investment income yeah so I mentioned earlier that uh you cannot deduct these fees however your corporation can't because it's managing the LLC for you the trading partnership yeah what I would say to you guys is go to the YouTube channel and there are videos on on uh how to set up an active Trader business now some of you guys are already saying there's something called Trader status now Trader status you can write things off but you must do two things number one you have to qualify as a Trader which means I'm making money in the uh in a regular continuous basis it is substantial it's really the way the courts have interpreted this it's it's more than 750 trades a year and it's how you make your living and if you take more than two to three weeks off a year for vacation or you or you miss out I think that that one Court was saying essentially 75 of the trading days you need to be trading you don't do that you're not going to be a Trader yeah so number one that allows you to write off your expenses as business expenses as to whether they will be losses will be allowed you must make a mark to Market election and you would have had to have done that last year before April 15th you can't make a mark to Market election retroactively or for this current year we can't even make a an election for 2022 you're going to have to wait like actually for 2023 we'd have to make it well if you make it by April 15th uh 2023. it's actually good for 2023. so it's for 2023 but not for 2020. 2022 is gone 2022 you cannot do this so you'd have to be a Trader and a mark to Market election and something else people don't realize is when you're a Trader what the courts are saying is you have to be looking to make profit from the daily fluctuations of prices I mean if I'm holding a bunch of stock long and I'm holding this over here very very short I don't get to merge all that together yep I have Investments and I have my short term it's weird isn't it it's because it doesn't exist in the code it was something somebody conjured up pulled out of their katush and they went to the court saying hey it's not fair I'm a business and I meet the level of a Trader business and here's how I do it and the courts created this thing if you have a W-2 you're going to fail yep if you do anything else substantial you're going to fail uh if you look it up online there's a number of websites that tell you all the different ways this can go wrong yeah you can just go to our YouTube channel I've written on it and I've done a ton of videos on it we have like you you'll find I think we've had about 1400 videos and I would I would I would wager that there's probably 20 or 30 down there that'll be here and dive into the subject and you could realize we're not big fans of Trader status even though you might qualify here I'd have to look at it see if you're making money if you're making money you might be fine we might say yeah you could be a Trader we're not worried about the mark to Market because you don't have a loss we could do it but there's like you may as well just put a bullseye on yourself and say I'd like to be audited because it's facts and circumstances there's no statute that says you do this you qualify therefore you get to go in front of the court to see whether you qualify which means you probably going to get audited and they're probably going to make you go through the to a tax judge to determine whether your facts and circumstances meet the requirements yeah so if you're trading and you're making money for me it doesn't make sense to do the trader status unless you have substantial other expenses you want to deduct for the only people that makes money on are people that are not very good Traders and they lose money a lot and we could probably make them more money by suggesting that they stop trading here here's how you make more money come here right so this Saturday I mean I have uh Aaron Adams and I and Nicole debracio probably gonna be going over uh mostly real estate but Infinity has two components to it it's both the stock and the real estate now here's the good news everything's free to get in and to also be a basic member to get most of the uh the methodologies on the stock market like you don't have to be uh what we call a 360 member to get access to that if you want to learn how to trade in a very systematic boring Gonna Get Rich over a long period of time because statistically it's almost inevitable if you do this uh we are like but we narrow the market down to maybe 60 companies that are going to meet the criteria at any given time and of those 60 you're probably looking at five a week that are going to hit it uh that would be something you'd invest in it's really really we keep it simple this week we're going also over real estate where we want about a third of your portfolio to be in real estate uh not 100 you notice that about a third of it's going to be an income producing stocks and about a third of it is is managed Investments of some kind be it real estate or uh Securities and then 10 cash or cash equivalent so like we have a pretty simple methodology but it works some people say oh it's boring good boring's good sometimes find the good things like good income producing properties we find them all over the country you're gonna know uh well if you go Saturday you'll figure out that everybody that you're talking to is an avid investor uh myself included so we'll be going over that it's uh nine to five Pacific Standard time or nine to four Pacific Standard time we never really go to five uh but we will go over the whole how it works our philosophy it's absolutely free if you have a young person or somebody that's experimenting with debt we'll get we will cure them of that uh send them on over like if you have one of those knuckleheaded nieces or nephews or kids that you're like God dang it will someone talk some sense into them we'll show them the charts it's pretty it's pretty straightforward so you want to come to that it's absolutely free Patty will probably share a link to it and you come on out somebody says why do lawyers do that because we get tired of watching all these people getting people to lose money we don't want you to lose money we want you to stay a client in order to be a client you need to be making money because tax issues are usually the realm of those who are making a lot of money so I need to make sure that you guys make a lot of money you lose money you don't need us then Jeff and I are sitting around twiddling our thumbs going where did all the clients go they all lost everything they had I don't have to do a return for them anymore right we need you guys to be making money so a few years back really one of those things that bit Us in the katush and said we better do this wrote a book called Infinity investing and we've been teaching it ever since it's absolutely the basic we'll get you where you need to go it's absolutely for you guys um used to be behind a paywall and we said as soon as we can stop doing that we'll do that and we do very very well just with our business we help you guys make money it is very helpful for an asset protection and tax firm to have somebody teaching them how to make funds is great yeah so I started a business last year setting it up as a C Corp I invested approximately a hundred and eighty thousand dollars as franchise fees equity and checks so it sounds like they probably got like a Quiznos or something what are the different ways to get the tax benefits well reimbursing myself should I Leverage The 1202 this is this is only applicable when you sell a business and it's small business stock and like we're not going to worry about that so we can't do that can I still reimburse myself for the equity what do you think uh first off we we would need to know how you invest at your 180 000 there's two ways right yeah you can put it into you could have bought stock or you could have loaned the money to the corporation or actually a combination of the two but those are the two primary ways um so I would hope most of this 180 000 was in the form of a loan you can repay that to yourself anytime you want you could still give yourself the equity like if somebody goofed up and they said hey I'm going to put in 180 000 in exchange for shares you can always that's your basis you can always right redeem those and give yourself back the 180 000. um I'd rather do what Jeff's saying which is just loan it you know fund the company with 10 bucks and then loan it um the the the operating Capital but you might need it and then it can always give you that money back absolutely free yeah one thing he mentions is the tax benefit you're not going to see a personal tax benefit because this money belongs to the corporate well the expenses belong to the corporation yeah now it's a C Corp so there's losses in that company period yeah and those are going to be trapped inside that C Corp you should know that if you dissolve the C Corp you can take up to 100 000 of it as a personal loss yeah so if you're married right if you bust at 180 000. it's not like you lose the 180 000 you'd get a hundred thousand
dollar loss plus you'd lose the value the capital loss on the stock which is another eighty thousand dollars so if you put this in as a equity okay I paid 180 000 for my shares you're gonna get some tax relief on it if you did this as a loan then you're again then you're really earn it for zero the company may have 180 000 180 000 loss but it has nothing to do with you yeah right you don't get a benefit from that but you can get your hundred eighty thousand dollars back and it should be paying you interest if it's over ten thousand bucks it's got to pay you Federal AFR rates at a minimum as an Insider probably around three percent right now I don't know what they are I think they've dropped quite a bit um they're back up now well I think I'm like a quarter percent last year they were really low but the long term was I thought it was closer to two percent the long term you might be it's been all over the place yes I was I was frankly surprised uh how do you do this as a loan the recording went out briefly you just loan it you just actually do a note here's underneath thousand dollars you're gonna pay me back three percent interest plus the principal here's it's a demand node I'll tell you when to pay it and then it should pay you the interest if it can't pay you the interest then it's an IOU right hey you owe me the money yeah this is a true C corporation you're one of going to put some money towards Capcom common stock but not the whole 180. all right here we go I bought a rental property on December 8th of 2021. the renter signed the lease on December 24 2021 but it didn't start uh uh the lease started on 1-1 2022. so you leased it on January 1st of 2022. right no rent was paid until January 2022 so here's the big question when is the property considered placed into service and Jeff you'll have to explain why that's important and when do I start depreciation I didn't have any income for 2021 so with the depreciation carry forward Jeffrey so property is placed in service when it's available for business use that is you put it up sometime in December for uh advertising it to be rented out uh you did find a runner so technically it was place and service sometime in December however and I hope you agree with this I'm going to say it wasn't placed in service until January 1 of 2022. uh I would say that it was available for service placed in service it was available for rent the day that he bought it so I don't think I would take any well it's going to depend on what my other deductions are on my schedule but you would have a very small sliver oh yeah but I would take it in 2021 even though he doesn't have any income or he's not going to be able to use it if it was vacant then you can't take it as a loss anyway you just carry it forward but he's going to get that he might get that extra month right yeah it's a small amount but but if he doesn't do that how are they going to treat it if it was put into service on January 1st is he going to get the full year are they going to do a half year convention oh I see would you they'll do a half month convention so if you say it's placing service on January 1 he'll get 11 and a half months which appreciate it so this way we get an extra month of depreciation so that's I see what you're saying but technically it's placed into service when it's available to be rented you don't even have to rent it technically to get depreciation and the depreciation may not even be your biggest expense there may be some other expenses real estate taxes that you may have paid uh interest that you paid if there's a loan on it uh we don't know that's you you don't want to lose those expenses you want to go ahead and collect uh report those now here's the big one is if I didn't have any income in 2021 can I carry that depreciation forward I think you're required to actually so it's not could you I don't think you can take the loss because there wasn't anybody in the unit so I think you're sitting in a situation where unless I'm wrong no you could still take the loss um but if you're making more than 150 000 a year you're not going to be able to take the loss if you have a vacant unit would you aren't you Limited uh no because it was available for oh it was available then you would be able to use that against your other passive income unless you're a real estate professional in which case if you're a real estate professional or if this is short-term rental so it sounds like it's it's a year-long rental so it's not so the only thing would be are you real estate professional that's not coming up in this fact pattern so we're going to say no you would use it to offset some of the rents otherwise you just carry it forward you don't lose it but good questions always uh get interesting can you talk about writing off a new truck purchase for use exclusively for my business and what are the tax benefits of having real estate professional status so let's do number one can you talk about writing off a new truck purchase for use exclusively for my business well I I got to combine this with a second part of the question because they say real estate professional status um so if I'm buying a new truck and all I am is a real estate professional I doubt that I'm gonna have 100 business use for this vehicle well they have so let's just say this is Construction so this isn't an investor so this is this is let's say it's construction real estate agent fill in the blank if you're out there and you wrote this question maybe put in chat uh what what you do and it's used exclusively which means 100 percent if that's the case then you're going to be underneath the um what is it luxury Vehicles personal luxury Vehicles yes so the question is can I write off my entire truck in Year One and it depends on the size of that truck right or whether it's whether it's the type of truck big open back I think the bed matters and things like that whether it's going to qualify as equipment if it qualifies as equipment you can write off 100 of it and it's just like any other equipment you purchase whether you put it in service for one day or one month or or the whole year you can write it all off you can use bonus depreciation you could actually use Section 179 the big issue is once you do that we have to really like that needs to be used exclusively for that business correct it can't come over to you personally and you can't really like just get rid of it it makes it makes more sense if as a real estate professional if you have an apartment complex and you're buying a maintenance truck or something like that uh it makes more sense to put it inside the company inside the business uh if you just have a couple rental properties that you're tooling you're not you're not going to need it you're not going to like exclusivity so so Jeff and I get on here all the time and we're usually telling people don't put your car in your business because you have to use it more than 50 or there's adverse tax consequences and if your company owns your truck and you start using it personally it's a taxable event to you it's the same as it giving you wages so you gotta so when I when I see a fact pattern where it says exclusive then I'm like okay you're gonna have commercial insurance on it yep that means and it's going to be for the business it's probably going to stay at the business and hopefully it is a type of business that is requiring a you know big truck or something like that if that's the case yeah you can write it right off now real estate professional status if you are in a profession short-term rentals Airbnb BRBO construction development uh real estate agent if you manage properties even your properties and you meet the requirements under 469 it's a section of the code where you do more than 750 hours in in one of those businesses one spouse has to qualify 750 hours of more than 50 percent of their personal services for the year so it if you have another job and you do that other job for a thousand hours you need to do a thousand and one hours in your real estate active businesses and you have to materially participate on your investment properties do you do those two things your losses are no longer passive for Real Estate they become active ordinary losses and if that's the case you can do a lot of good offsetting your other income so a W-2 job of a spouse if you have another W-2 job if you have another business that's kicking out income you can offset it now that truck let's say it's a sixty thousand dollar truck something like that probably not enough let's just say sixty thousand and it creates a loss of sixty thousand dollars if you're a real estate professional you could take that sixty thousand dollar loss and use it to offset your W-2 income or your spouse's W-2 income right that's the benefit of real estate professional status and you could take your depreciation and create losses so same scenarios before we had the person who put the property in the service you're depreciating that well you have a bunch of properties you can depreciate those and take those against your W-2 income your spouse's W-2 income and your other incomes and I know we have a question coming up on this but also it's your if you're a real estate professional cost of segregation becomes a much bigger tool and if you're not I think we have a question on cost seg and we'll get into it there but cost sake is a fancy way of saying I'm not going to go with the wrong way that they'd have us do real estate I'm going to do it the right way and I'm going to write off all the components of that building that are not long term assets you know or you know that are really equipment like things like carpeting that's not part of the structure why am I writing that off over 39 years or 27.5 years that's that's
silly carpet doesn't last that long but if you listen to Most accountants we're all gonna you know including us like they're always going to go with the default which is 27.5 years and that's actually the wrong way to do it they just allow you to do it the right way is to break all these components down but it's complicated and you're going to need an engineer to do the study people don't want to pay that if you do it it could be a huge win for you huge win we've had properties that people bought for 1.3 million I'm thinking of a RV park and we had a million dollar deduction in year one and they financed it they were in it for maybe a hundred thousand yeah you can end up with literally getting more taxes back than it cost you to buy the property if you do the cost sex right and if you're a real estate professional uh somebody did ask a question going back a couple and it said hey why would it make sense to do from a tax perspective to do a small amount of equity and then a loan versus doing it all is equity from a tax standpoint it's not a huge difference in fact in both cases you could get the money back it's just so much easier if you have a loan because if you put in equity then what I'm doing is the company is redeeming my shares and then it's giving me back the money and it's the same amount of money that I spent for the shares So in theory there's zero tax on it but what you're really doing is funding the com you're funding the company you're you're not really when you put the money in if you need the money back out you're not really funding that you're not buying
2022-07-08 04:57
