tax question

[JOHNNIE36]

I agree. I wouldn't want to manage that property from a distance. Been there done that and it didn't work for me. I missed the part about Brewer moving across the country. Condo rentals are a little different. If you are in an area where those rentals are the norm, like beach condos, having a management/rental agency works well.

 

[Hobo]

Its all of what you are tuned into. Most people in this forum prefer the stock market; I played the real estate game all of my life. As a consequence, I had good contacts with agents and property management companies in my area. In the early days I did everything myself. But when I started to acquire 3 or 4 rental properties, I needed help.

Later in life I took an assignment overseas and left my rental units and house (turned rental) in the hands of a property manager for 2 years. Like all things, what suits one person doesn't fit everybody. Funny thing, I just got good at making big money in real estate and then I retired! Diversity makes life fun I guess

 

[Gone4Good]

Converting to a rental . . .

Anyone know the IRS Pub that covers this topic?

Bonus points for a linky.

 

[jebmke]

Anyone know the IRS Pub that covers this topic?

Bonus points for a linky.

Probably in 527

Publication 527 (2010), Residential Rental Property

 

[Gone4Good]

Probably in 527

Publication 527 (2010), Residential Rental Property

Gracias!

 

[Hobo]

Here's a link to closest IRS publication http://www.irs.gov/pub/irs-pdf/p523.pdf

It's pretty complex with a lot of options.Here is an interesting discussion by tax attornies on Linkin:Can I change the cost basis of my primary residence if I convert it to a investment property? | LinkedIn Answers | LinkedIn

In this last link, a guy named Ken offers an interesting idea. Assume you bought your house for $300,000. Now it is worth $200,00. If you rent it out, you must reset the tax basis to $200,000 - no tax deduction. Ken suggests before you rent it out have a "friendly sale" to someone woh is a non-relative for the price of $300,000. A month later you buy the house back again for $300,000 and rent out the house as a property investment. This friendly sale resets the price of the basis of the house to $300,000. He concludes the cost of the two transactions would be too complex to be worth the $20,000 capital loss (the IRS taxes capital gains at the rate of 20%).

 

[Bestwifeever]

Its all of what you are tuned into. Most people in this forum prefer the stock market; I played the real estate game all of my life. As a consequence, I had good contacts with agents and property management companies in my area. In the early days I did everything myself. But when I started to acquire 3 or 4 rental properties, I needed help.

Later in life I took an assignment overseas and left my rental units and house (turned rental) in the hands of a property manager for 2 years. Like all things, what suits one person doesn't fit everybody. Funny thing, I just got good at making big money in real estate and then I retired! Diversity makes life fun I guess

Are you still invested in real estate? If not, what did you move your big money into and why?

 

[Hobo]

Hmm Pub.527 or Pub.523?
Well you can see the IRS has not made this easy

 

[rescueme]

Presumably it is reviewed by a human before sending you a bill and a small penalty.

No, it isn't.

I'm not going to rehash the problem I had (actualy my disabled son) had a few years ago, which required the action of the Taxpayer Advocate's Office, along with my local congressman over 2+ years which resulted in threats of fines, selling off of personal assets, and more.

I'll just say in simple terms, the IRS (and its procedures) suc* ...

 

[jebmke]

Gracias!

de nada.

I am a pro bono tax preparer (TaxAide). As a secret agent for the IRS, I keep these links handy. You never know when you might need to take advantage of a taxpayer.

 

[brewer12345]

Given Brewer's move across the country I doubt that he wants to rent his former home. There are times to just move on even if the tax man cometh....

Bingo. Looking to do the deal and lose a source of aggravation, despite the NJ exit tax and everything else. This must be what an overdue divorce feels like.

As for the tax code, I am a cfa, MBA and I do a job that involves voluminous rules and regs. I still get a letter purporting an error from a tax authority about every other year.

 

[Hobo]

Bestwifeever, my last job was as Public Works Director for a city in California. I became very familiar with municipal bonds. One variety is tax free, and backed by the General Obligation Fund of the City. That is, you get paid ahead of all other expenses the City must pay. Very secure, AA rated. In the year 2000 I locked in a tax-free interest rate of 5.5% per year for 20 years. One million dollars at 5.5% yields $4,600. I retired to Indonesia, bought a house in Bali, and live on the interest. I get back to the US once a year to visit family. I pay a bookkeeper $75/mo. to provide a US address and also handle miscellaneous stuff in the US - like filing paperwork that comes in.

 

[arebelspy]

Bestwifeever, my last job was as Public Works Director for a city in California. I became very familiar with municipal bonds. One variety is tax free, and backed by the General Obligation Fund of the City. That is, you get paid ahead of all other expenses the City must pay. Very secure, AA rated. In the year 2000 I locked in a tax-free interest rate of 5.5% per year for 20 years. One million dollars at 5.5% yields $4,600. I retired to Indonesia, bought a house in Bali, and live on the interest. I get back to the US once a year to visit family. I pay a bookkeeper $75/mo. to provide a US address and also handle miscellaneous stuff in the US - like filing paperwork that comes in.

So you sold your properties, paid capital gains, and bought a municipal bond?

 

[Hobo]

So you sold your properties, paid capital gains, and bought a municipal bond?

Basically right. I spread the sale over several years and paid the 20% capital gains tax. But I remember writing a check for $156,350 to the IRS in April 2000. That was the first time and last time I ever wrote out a check that large. I remember laughing to myself because writing the amount "one hundred fifty six thousand three hundred fifty" is tough to fit on a small check. It took me three tries to print small enough.