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re: Buying a house for my mother-in-law turned into a great tax shelter
Posted on 3/30/15 at 12:31 pm to samson'sseed
Posted on 3/30/15 at 12:31 pm to samson'sseed
Do you are going to carry forward the losses (which are basically only depreciation if she is paying the house expenses) for years, eventually sell the house, take all the losses, and get hit with depreciation recapture.
What exactly are you sheltering?
Credits for college are limited by adjusted gross income.
Your point about the 120 pages of stock transaction is spot on, though. I see this a lot and it cracks me up. In the name of "diversification" a stockbroker will own 3 shares of each of 110 companies, constantly buying and selling them.
What exactly are you sheltering?
Credits for college are limited by adjusted gross income.
Your point about the 120 pages of stock transaction is spot on, though. I see this a lot and it cracks me up. In the name of "diversification" a stockbroker will own 3 shares of each of 110 companies, constantly buying and selling them.
0
Posted on 3/30/15 at 12:40 pm to samson'sseed
Tax evasion sure does sound easy. :)
Posted on 3/30/15 at 12:48 pm to hungryone
quote:
Any decent CPA can advise you about renting at a below market rate to a relative, and how it affects your circumstances.
Considering his relative was in public housing and likely is in some type of trailer, what would the implications be of "gifting" the relative money then having it turn around and pay for rent?
Posted on 3/30/15 at 1:00 pm to GenesChin
quote:
what would the implications be of "gifting" the relative money then having it turn around and pay for rent?
I'm willing to bet that as long as he gives her the money to pay and he doesn't somehow pay himself (sounds stupid, but it can matter), then it'd be okay, as long as the rent income is around the market price. However, this is all just an educated guess from an accounting major
Posted on 3/30/15 at 1:07 pm to Hazelnut
I imagine he could set up an account in her name, deposit the money then auto draft from that account.
Due to him not making money and taxes on gifts under a certain amount, I imagine he has no tax liability and it is just a lengthy process that achieves a "loop"
Due to him not making money and taxes on gifts under a certain amount, I imagine he has no tax liability and it is just a lengthy process that achieves a "loop"
Posted on 3/30/15 at 1:20 pm to GenesChin
quote:
I imagine he could set up an account in her name, deposit the money then auto draft from that account.
Except that assets on deposit in her name actually belong to her (in LA)....and thus having money in the bank may impact any other public benefits she receives (like LAPurchase/SNAP, aka food stamps). He can't open an account in her name without her pertinent details or her knowledge.
Posted on 3/30/15 at 1:25 pm to samson'sseed
It's available to poor people.
Posted on 3/30/15 at 1:33 pm to hungryone
quote:
and thus having money in the bank may impact any other public benefits she receives
I can't imagine that the monthly costs of "fair market" rent would push her over the edge on that. I doubt he moved her from public housing to McMansion when she got kicked out of public housing.
quote:
He can't open an account in her name without her pertinent details or her knowledge.
I know he would need her permissions but he could set it up to transfer almost immediately. Or maybe a custodial account?
Posted on 3/30/15 at 2:07 pm to samson'sseed
quote:
Why would getting less income through rent be penalized by the IRS?
ARM'S LENGTH!
Posted on 3/30/15 at 2:44 pm to GenesChin
quote:
I imagine he has no tax liability and it is just a lengthy process that achieves a "loop"
Kinda sounds like laundering to me..
As for the 120 pages of stock transactions and $13k in brokerage fees. That could easily be done on a $1mm UMA account. And it could very well be feasible for the client. Lots of UMA accounts are selling energy stocks right now for the loss and waiting 30 days to buy back in to avoid wash sales.
Posted on 3/30/15 at 2:59 pm to Brummy
"unless the family member uses it as his or her main home and pays a fair rental price"
It is her main home, and it is a fair rental price in my opinion.
It is her main home, and it is a fair rental price in my opinion.
Posted on 3/30/15 at 3:42 pm to samson'sseed
quote:
I've declared it a rental property. I only charge her $200 a month fir rent and wrote on the lease that she would never be evicted for failure to pay rent. Plus zero security deposit. All I really care about is that the rent covers the property tax and insurance.
=/=
quote:
it is a fair rental price in my opinion.
Also, $200 a month doesn't cover a whole lot of insurance for rental property and property taxes since no homestead exemption would be available.
Posted on 3/30/15 at 3:51 pm to TigerDeacon
quote:
it is a fair rental price in my opinion.
The IRS determination of fair market rental prices have absolutely nothing to do with your opinion. If audited, you will need to prove that the price is indeed FMV, and FMV is based on the assessed price and the gross rental multiplier for your area/real estate market.
Posted on 3/31/15 at 7:15 am to samson'sseed
quote:
It is her main home, and it is a fair rental price in my opinion.
Lulz
Posted on 3/31/15 at 2:13 pm to samson'sseed
Your mother-in-law is a related party to your spouse. If your spouse has any ownership interest in the house your mother-in-law is renting, then you mother-in-law is a member of your family, and you have potential personal use issues unless your mother-in-law is paying a reasonable rent. Determining what is a reasonable rent is a facts and circumstances matter. See the section Related Party Rentals at LINK
Posted on 3/31/15 at 6:24 pm to Poodlebrain
Poodle, what if the house is separate property and the non-related spouse has filed a declaration of paraphernality, which allows all fruits from the separate property to also be separate?
I cannot believe that the IRS would leave this open.
Also, if you dont mind, shoot me a pm with your information. I would like to use your services in the future.
I cannot believe that the IRS would leave this open.
Also, if you dont mind, shoot me a pm with your information. I would like to use your services in the future.
This post was edited on 3/31/15 at 6:27 pm
Posted on 3/31/15 at 7:10 pm to samson'sseed
It's interesting that you, a leftist, are trying to pay less in taxes. I figured you'd be all for paying as much as possible, or, are you just interested in other people paying more in taxes?
Posted on 3/31/15 at 7:37 pm to TSLG
In-laws are not related parties for tax purposes by definition. So separate property status would eliminate the personal use issue. There would still be issues of below market rent and deemed gifts to consider. Those issues would impact both the landlord and the renter, and not simply for income taxes. The mother-in-law would have to worry about disqualification for certain entitlements.
I can be reached a tdpoodlebrain@gmail.com.
I can be reached a tdpoodlebrain@gmail.com.
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