[NA]Land, Taxes, etc[NA]

Let'sgoflying!

Let'sgoflying!

Touchdown! Greaser!
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Dave Taylor
Let's say you just bought some real estate, and have to decide on its use, for tax purposes.
Presumably a better use, from the standpoint of taxes is to make it all a business. The only other choice I could see is as personal recreation property (it is a house with acreage) and such a use would likely be the worst tax situation.

So what other considerations are there other than IRS taxes (and potential income)?

I asked my cpa and he says decide based on other than taxes. I was not getting the answers to other questions (I like him for other reasons so I am not about to ditch him right now.)

As a business (rental, B&B, vacation home) I think I can depreciate the buildings, not the land and can deduct repairs, improvements.

I don't see any way to get the efficient hvac tax credits on such a property.

What else should be considered?
 
Do what everyone else does: Put 2 goats on it, call it an ag-business and write off your life :D
 
weilke said:
Do what everyone else does: Put 2 goats on it, call it an ag-business and write off your life :D
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LOL, it seems everybody in Alabama does that.

Its best use, regardless of tax purposes, is one that makes money.
 
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Dave - how close to the airport? room for sailplane trailers?
 
Already have the ag exemption covered; bonafide too!

Back to IRS tax issues:
I understand land is never a deductible item.
But getting the buildings, and any work done on them depreciable or as applicable, a deduction is a concern.

sorry Tony, couldn't get permission for such storage. :(
 
I'm not a tax lawyer, so FWIW:
Let'sgoflying! said:
I understand land is never a deductible item.
Click to expand...
Pretty much true, but see below
But getting the buildings, and any work done on them depreciable or as applicable, a deduction is a concern.
Click to expand...
You can depreciate buildings and equipment you use in a business. You can donate them to a charity and get a deduction.

Here is a plan alleged to be true. A guy bought a plot of land in Vermont that had a marble quarry on it. As he quarried the marble, he took a depletion allowance. Just like an oil well, there is only so much marble in there and depletion is a legitimate deduction. OK, now the marble is gone. So he leases it to the town as a garbage dump... He took a depletion allowance once again as you can only put so much garbage in it. Finally, he landscaped the property and gave it to the town as a park. Bingo, tax deductible donation! This tale has not been vetted by a tax lawyer so FWIW...

-Skip
 
You'll find some of the answers in IRS Publication 527, "Residential Rental Property (Including Rental of Vacation Homes)." You can download a copy from the IRS website (www.irs.gov/formspubs) or call 800-829-3676 to request the printed version. It won't take the place of hiring a tax advisor, but it might shave an hour or so off the $150-per-hour bill.
 
I think your CPA nailed it. The depreciation rate on R/E is so slow as to be inconsequential and that's the only paper loss you get. Everything else is a push based on actual expenditures.

Go with the best economics and forget the tax consequences. Also bear in mind that the cap gain rates may be as high as the ordinary rates when you sell it (depending on which party controls congress) so the perceived tax benefits of deferral and conversion may not be as great as in the past.

PS: I'm not a tax practitioner either, but spent a large chunk of my career structuring and peddling depreciation deals. If Packwood hadn't trick-pooched us, I would probably still be doing it.

Let'sgoflying! said:
Let's say you just bought some real estate, and have to decide on its use, for tax purposes.
Presumably a better use, from the standpoint of taxes is to make it all a business. The only other choice I could see is as personal recreation property (it is a house with acreage) and such a use would likely be the worst tax situation.

So what other considerations are there other than IRS taxes (and potential income)?

I asked my cpa and he says decide based on other than taxes. I was not getting the answers to other questions (I like him for other reasons so I am not about to ditch him right now.)

As a business (rental, B&B, vacation home) I think I can depreciate the buildings, not the land and can deduct repairs, improvements.

I don't see any way to get the efficient hvac tax credits on such a property.

What else should be considered?
Click to expand...
 
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