Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 07-29-2014, 07:10 PM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
calmloki's Avatar
 
Join Date: Jan 2007
Location: Independence
Posts: 5,460
Quote:
Originally Posted by LOL! View Post
So you have full-time jobs as landlords? Is that what you want as you get older? Or do you intend to unwind or pass the job on to the children?
The first plan involved our selling everything right about 2008 and retiring to a life of bonbons. Then we decided to sell a place per year. I spent about 16 months selling one little house while watching the prices drop, and the next years listing other places, worst first, and chasing prices down. Really got to the point it didn't make sense to sell, as the rental profit exceeded any reasonable return on about 70% of our sale price (about what we would have left to invest after paying fees and taxes).

We are landlords part time - like when we gotta be. We have one loyal and trustworthy person who stands in our stead most of the time. We are about to give him one of the multi units, doing an IRS form 709, as he would be in our wills anyway and we would rather he have the benefit now. That will reduce our income and reduce our rental headaches.

We do like places and buildings - rentals and property loans have allowed us to look at and participate in a bunch of places and actually make a living doing so. I'm just not as eager to make silk purses as I once was.

Edit: While inheriting our places at a stepped up basis is a great deal for our heirs I would rather not saddle them with running rentals - nor would I feel right about sticking our tenants with clueless landlords.
__________________

__________________
calmloki is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-30-2014, 06:28 AM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,490
I wonder if you could form a C corporation and contribute some of the properties to the corporation in exchange for stock. The the corp owns and operates the properties and pays you for running it in effect shifting rental income to wage income and you can use that structure to take advantage of tax deferred savings opportunities. You could manage it so the corp net profit is mininal so no corp taxes would apply and the wage earnings would also get you SS credits.
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 07-30-2014, 07:33 AM   #23
Full time employment: Posting here.
 
Join Date: Nov 2008
Posts: 728
I'd look at Vanguard's tax exempt balanced fund.....pays out about 2%, low taxes because over half of the payout is muni bond interest, overall safer than 100% stocks, increases each year because of the increasing dividends on the half that is in large cap stocks.....don't really have to worry much, lower taxes and easy to maintain. I sold a bunch of commercial RE and invested there....don't make as much.....don't worry as much!
__________________
jerome len is offline   Reply With Quote
Old 07-30-2014, 04:08 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,627
Thanks for the explanation of how you all are going to unwind all this.
__________________
LOL! is offline   Reply With Quote
Old 08-01-2014, 05:10 PM   #25
Thinks s/he gets paid by the post
 
Join Date: Feb 2008
Location: Indialantic FL
Posts: 1,202
What about 1031 into a REIT?
__________________
JimnJana
"The four most dangerous words in investing are 'This time it's different.'" - Sir John Templeton
jimnjana is offline   Reply With Quote
Old 08-01-2014, 05:39 PM   #26
Moderator
MBAustin's Avatar
 
Join Date: Jul 2010
Posts: 4,166
Quote:
Originally Posted by calmloki View Post
While inheriting our places at a stepped up basis is a great deal for our heirs I would rather not saddle them with running rentals - nor would I feel right about sticking our tenants with clueless landlords.
You are definitely doing your heirs a favor. My parents left a bunch of rental houses in our hometown to us (actually they gifted them to us over a number of years). They were all older low-rent homes in a depressed small town, not close to where either my sister or I live. I think I've spent more having an accountant do my taxes than we've made in rent over the years. We've been disposing of them but some of them are impossible even to give away. One left that we just can't seem to get rid of. What a pain.
__________________
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute." William Feather
----------------------------------
ER'd Oct. 2010 at 53. Life is good.
MBAustin is offline   Reply With Quote
Old 08-01-2014, 05:49 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
calmloki's Avatar
 
Join Date: Jan 2007
Location: Independence
Posts: 5,460
Quote:
Originally Posted by jimnjana View Post
What about 1031 into a REIT?
Interesting idea - not sure it is allowed as a like kind exchange, but if it is and avoids tax on the exchange that would be great. Can't imagine how divesting of the REIT would be taxed though - pulling profit seems simple, and maybe heirs could sell at stepped up basis, but if we were to divest or exchange for some other fund it feels like a tax nightmare.
__________________
calmloki is offline   Reply With Quote
Old 08-01-2014, 06:05 PM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,291
Quote:
Originally Posted by jimnjana View Post
What about 1031 into a REIT?
Quote:
Originally Posted by calmloki View Post
Interesting idea - not sure it is allowed as a like kind exchange, but if it is and avoids tax on the exchange that would be great. Can't imagine how divesting of the REIT would be taxed though - pulling profit seems simple, and maybe heirs could sell at stepped up basis, but if we were to divest or exchange for some other fund it feels like a tax nightmare.

Just me, but I do not think that a REIT would be close enough for the 1031...

The reason for the 1031 is to defer recapture of depreciation... there is never any recapture of depreciation if you sell shares in a REIT... so, just does not pass the smell test to me...

however, if you are talking big dollars it might be worth going to a bank that handles these and talk to an expert... they know the various rules and could tell you right away what will and will not qualify...
__________________
Texas Proud is offline   Reply With Quote
Old 08-01-2014, 06:49 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
calmloki's Avatar
 
Join Date: Jan 2007
Location: Independence
Posts: 5,460
Quote:
Originally Posted by Texas Proud View Post
Just me, but I do not think that a REIT would be close enough for the 1031...

The reason for the 1031 is to defer recapture of depreciation... there is never any recapture of depreciation if you sell shares in a REIT... so, just does not pass the smell test to me...

however, if you are talking big dollars it might be worth going to a bank that handles these and talk to an expert... they know the various rules and could tell you right away what will and will not qualify...
Suspect you are correct but can run it by our tax person. She has shot down more cunning plans of mine.... Keeps us out of the kind of attention we don't need.
__________________
calmloki is offline   Reply With Quote
Old 08-02-2014, 01:15 PM   #30
Thinks s/he gets paid by the post
 
Join Date: Feb 2008
Location: Indialantic FL
Posts: 1,202
Investing in upREITs as 1031 Exchange Replacement Property Solution Guess I should have clarified type of REIT. I looked into doing this years ago, just didn't have the potential tax liability to make it worthwhile, plus we decided to pay off house at the time with the extra cash.
__________________
JimnJana
"The four most dangerous words in investing are 'This time it's different.'" - Sir John Templeton
jimnjana is offline   Reply With Quote
Old 08-02-2014, 04:39 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,291
Quote:
Originally Posted by jimnjana View Post
Investing in upREITs as 1031 Exchange Replacement Property Solution Guess I should have clarified type of REIT. I looked into doing this years ago, just didn't have the potential tax liability to make it worthwhile, plus we decided to pay off house at the time with the extra cash.
Interesting... I had not heard about these... you still have the same problem you had before... just deferring it some more...

From the article (my bold):

The sale or disposition of their interest in an upREIT will result in a taxable transaction, including the recognition of their deferred capital gain and any depreciation recapture. The upREIT also has control over the asset they 1031 Exchanged into and therefore has control over the sale or disposition of the asset. The sale or disposition of the asset can trigger the recognition of the investors deferred capital gain and any depreciation recapture.



So, you no longer have control over when you are going to be taxed on the gain or recapture... might be getting into more trouble than it is worth... but, if you are in a very high bracket now and will be lower in the future it might be worth the trouble..
__________________
Texas Proud is offline   Reply With Quote
Old 08-02-2014, 08:55 PM   #32
Thinks s/he gets paid by the post
 
Join Date: Feb 2008
Location: Indialantic FL
Posts: 1,202
Quote:
Originally Posted by Texas Proud View Post
Interesting... I had not heard about these... you still have the same problem you had before... just deferring it some more...

....

So, you no longer have control over when you are going to be taxed on the gain or recapture... might be getting into more trouble than it is worth... but, if you are in a very high bracket now and will be lower in the future it might be worth the trouble..
DD is certainly a must. Units in UPREIT are convertible to units in the parent REIT. UPREIT take away the inheritance "landlord" issue.
__________________
JimnJana
"The four most dangerous words in investing are 'This time it's different.'" - Sir John Templeton
jimnjana is offline   Reply With Quote
Old 08-03-2014, 01:37 PM   #33
Thinks s/he gets paid by the post
tryan's Avatar
 
Join Date: Mar 2005
Posts: 2,449
I feel your pain .... after writing a 70k check to the IRS one year, I told DW "never again". Sooo when I was looking at getting "wacked" again we did the 1031 exchange into the lake property. Something we've really enjoyed.

I think you have a vacation place already .... but is there something/place to buy that would be "fun" (more fun than say, a multi in the intercity)?
__________________
FIRE'd since 2005
tryan is offline   Reply With Quote
Old 08-03-2014, 03:07 PM   #34
Thinks s/he gets paid by the post
Huston55's Avatar
 
Join Date: Jul 2011
Location: The Bay Area
Posts: 1,803
What about placing your rental properties into an irrevocable trust? My limited understanding is that this allows beneficiaries (which can include your spouse or SO) to receive income, and also steps-up the cost basis of the properties upon your (grantor's) death to avoid taxes on all the cap gains. I think you can also set up the trust, even though irrevocable, to have a fair amount of control. If you have enough properties and gains, this might be worth a tax experts time.
__________________
You may be whatever you resolve to be.
Huston55 is offline   Reply With Quote
Old 08-03-2014, 09:23 PM   #35
Thinks s/he gets paid by the post
 
Join Date: Jun 2004
Location: E. Wash
Posts: 1,060
Just researched the depreciation recapture rule. At sale, you have to "recapture" all the depreciation previously claimed. Depreciation recapture amount is taxed at a statutory rate of 25%. Any remaining gain over purchase cost plus improvements is taxed at whatever cap gain rates bracket your income puts you in--15-25%.
We are considering gifting our rental property to our university when depreciation is exhausted and we do want to deal with it any longer. No recapture plus a deduction.
Nwsteve
__________________
nwsteve is offline   Reply With Quote
Old 08-04-2014, 10:19 AM   #36
Full time employment: Posting here.
 
Join Date: Sep 2012
Location: San Jose
Posts: 607
Quote:
Originally Posted by MBAustin View Post
We've been disposing of them but some of them are impossible even to give away. One left that we just can't seem to get rid of. What a pain.
If you truly don't want it, and don't need any equity out of it, then just quit claim it to the current occupant.

Or, if it's unoccupied, see about quit claiming it to a local charity, Habitat for Humanity, etc.

Worst case...stop paying taxes on it and force the county to sell it off at a tax sale. Might affect your credit, though, I'm not sure.
__________________

__________________
LoneAspen is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
My 2010 income tax exceeds the average household income soupcxan FIRE Related Public Policy 96 01-01-2011 11:23 AM
What is an ideal debt to income ratio? And savings to income? TennisFan Young Dreamers 20 11-18-2008 05:54 PM
Current Income Vs. Retirement Income tgotch FIRE and Money 27 05-30-2008 05:23 PM
Does passive income = Retirement Income? Bree Young Dreamers 14 05-07-2008 09:53 AM
Income Stream, or Income Lump cfcf FIRE and Money 6 07-03-2006 01:37 PM

 

 
All times are GMT -6. The time now is 09:03 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.