Ever wonder how cryptocurrencies and real estate investments play together in the sandbox of taxation? Or how to pay your family members through your business in a way that could benefit everyone's wallet? We've got answers to these questions and more. Welcome to another episode of Tax Tuesday, where tax experts Toby Mathis, Esq., and returning guest Jeff Webb, CPA, and CFO of Anderson Business Advisors share their expert advice. This episode delves into the nuances of crypto transactions and the impact on your tax bill, along with a deep dive into payroll complexities that could save you a headache—or better yet, a hefty fine. Plus, we discuss why paying children through your business isn't just a clever maneuver; it's a strategic move that could pave the way to a tax-free goldmine.
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Highlights/Topics:
- I owned a condo for the last 28 years and depreciated it down to zero. In January this year I sold the condo to the renter and installment sale. For the next 10 years, I'll receive monthly payments, with a balloon payment at the end of 10 years. My question is as follows Do I have to recapture the depreciation and pay tax on it? Am I too late to do a 1031 exchange at this time? - If you’ve already sold it, it’s too late. 1031s do not work well with installment plans.
- What would be the best way to sell a small business and limit as much as possible the tax implications? - a stock sale is best, but almost no one will go for that….
- When are crypto earnings taxed?- When you sell it, you pay capital gains tax on the difference between your buy and sell.
- What activities classify for the 750 hours? Does training, traveling, searching for properties? - It's going to be real estate activities in your real estate business. Training, traveling, and searching for properties is “investor” activity
- I self-manage a single short-term rental that I own. I want to pay my kid, who is 16 years old, for doing legit work for the Airbnb at a reasonable rate. Do I just write them a check every month based on the hours they log, or do I have to hire a payroll company to issue them a check? I do not have any other employees. If I don't hire a payroll company, how do I issue them a W2 form? - you really should hire a payroll company, if you 1099 them, they will have to pay tax.
- I'm planning to start lending money to real estate investors. Other private money lenders I know do their lending businesses through an S-Corp. I currently don't have an LLC or an S-Corp for lending. I have a Wyoming Hold LLC that I opened to use for real estate investing. Which would you advise is best for private money lender an LLC, an S-Corp, any other, and why? - Do not do it through your Wyoming LLC. I like the S corporation rather than the LLC…
- I have a 50-50 partnership with a friend and we own two short-term rentals together. Each of us is maturely participating in one short-term rental each. Is there a way to take full cost-seg advantage against our respective W-2s or can we only take 50% of one property against your W-2 and the other person? It will go to the passive bucket and vice versa for the other property. - Couldn't we both get that deduction? Yeah, you probably could if we go back to the aspect that it's a trade or business
- I am a W-2 earner. Can I save taxes if I buy a long-term rental? - Probably not. Probably not at this time. Unless you’re a real estate agent.
- I'm getting a lot of pushback against cost segregation from my accountants. They say that it could trigger personal property issues in Maryland and that the cost of the study is prohibitive. - So what? The personal property taxes and most states is based on The Advalorium they call it. It's based on the current value. They usually have depreciation schedules of their own and it's not that much property tax.
Resources:
Infinity Investing
https://infinityinvesting.com/
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https://www.youtube.com/@TobyMathis
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Clint Coons Youtube
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