Real Estate Archives

Converting a House to Rental Use

One of the more popular ways to build wealth with real estate is to buy a house with a loan, move into it, fix it up, and then borrow against the higher value of the property to obtain a down payment for a second house. The trick is often to add sweat equity to increase…

Claiming a Casualty Loss for Property You Don’t Own

Natural disasters can be expensive. This is particularly true for those who own or have an interest in real estate. Our tax laws provide some relief through casualty loss deductions and theft loss deductions. But what happens when someone pays to repair property they don’t legally own? This question is particularly relevant when parents continue…

Section 179D Tax Deduction Claimed in Final Year

Architects and engineers who design energy-efficient government buildings can qualify for a Section 179D tax deduction. Technically, it is the building owner who qualifies, but since the government is the owner of the building and does not pay tax, our tax law allows the allocation of the deduction to the designer. This allocation provides an…

Immediate Expensing for Real Estate Costs

When a taxpayer has a capital outlay, they generally want to deduct the expense when the money leaves their bank account or when the liability is incurred. However, the accounting matching principle dictates that expenses should be deducted when the related income is received. The matching principle aligns the income and expense recognition. Our income…

The Short-Term Rental Tax Rules

While short-term rentals have fallen out of favor as of late, they do still offer tax benefits. There are reasons why short-term rentals have more favorable tax treatment than long-term rentals. Short-term rentals often require substantially more active management than traditional long-term leases. Owners must handle frequent turnovers, maintain the property to hotel-like standards, and…

Income Shifting to Reduce Tax for Real Estate Sale

Income shifting is a fundamental income tax planning concept. It involves strategically allocating income among related taxpayers to minimize the overall tax liability. This may be intended to use up tax attributes of one taxpayer (such as deductions or tax credits), take advantage of tax deferral options to delay paying taxes, or take advantage of…

Can a Co-Inheritor Do a 1031 Exchange?

Those who create wealth often accumulate assets to store the value of wealth they create. This includes assets that store value and produce additional income, such as real estate. In many cases, the wealth creator has put considerable time and effort into building their portfolio of investments. But when they die, those who inherit are…

The Limited Augusta Rule for Self-Rentals

While many taxpayers want to pay less in tax and there are legitimate ways to do so, some of the tax planning concepts that are frequently discussed miss the mark. The so-called Augusta rule is often one of them. Tax planners often cite this rule and provide tax savings estimates based on unreasonable assumptions. This…

Tax Deductions for Non-Facilitating Costs for IP, M&A & Real Estate

One of the most common disputes between taxpayers and the IRS revolves around the question of whether certain expenses are deductible in the current year or need to be capitalized and recovered over time. This expense versus capitalization issue arises in various contexts. We have considered a number of these disputes on this site. It…

Explaining Real Estate Profesional Status to IRS Employees

In the complex realm of the legal system, judges hold the vital responsibility of making impartial decisions, drawing from their wealth of life experiences. These experiences, in turn, have a profound influence on the judgments they render. This principle extends to other government officials as well, such as IRS agents, auditors, and attorneys, who are…