In this episode of Tax Tuesday, Anderson Advisors attorneys Eliot Thomas, Esq., and Toby Mathis, Esq., tackle a variety of listener questions related to tax deductions and property management. They discuss the implications of evicting tenants and the possibility of deducting repair costs, as well as how homeowners can deduct home office repairs. You’ll hear about the process for amending tax returns to include rental properties and explore the tax consequences of receiving large gifts from non-U.S. citizens. Additionally, they cover topics like the advantages of S-corp versus C-corp structures, the requirements for achieving real estate professional status, and the nuances of short-term property sales, including 1031 exchanges. Tune in for expert insights that could impact your tax strategy!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:
- “We rented our house last year due to damages caused by the tenant violations of the agreement. We evicted them.” “The tenant abandoned the property with their belongings.” “With proper judgment and the sheriff’s help, we evicted them and cleaned the property. The tenant caused too much damage. Can we include the cost of fixing it on our taxes?” – yes, and we have two categories, repairs or improvements.
- “I work from home. I already take deductions for my home office. If there is a repair in the house like plumbing or an appliance repair, am I able to take a percentage of that repair off as a deduction?” – As a general matter, yes.
- “In 2022, I bought and rented a rental property, but I never put the property on my tax return. Can I now add this property to my tax return and take advantage of the tax deductions, cost of ownership, et cetera? Is there a limitation on how far back someone can amend a tax return or add a rental property purchase in the past?” – yes, you can. Is there a limit to how far back? Yes, I’ll hit the limit first, three years from the date that you filed.
- “My parents live in Singapore and are not US citizens. They want to give me and my kids $200,000.”“They have not previously gifted us any funds. Will any of us need to pay tax on this?” – Generally speaking, I don’t know of a tax necessarily if you have non-US citizens giving cash gifts over to their children or family.
- “Is there a different procedure to buy a residential multifamily with a pizzeria?” “Is there a different procedure to buy a multifamily with the pizzeria running downstairs?””We have our long-term rental properties with LLC. How should we proceed with this? Can we do a cost segregation study and take bonus depreciation on this type of property and take advantage of the passive deductions?” – For both, you can go ahead and do a cost segregation study, see if it would be in your favor—usually it is
- “What type of activities can I log toward REP (real estate professional) status, as a real estate agent? For example, working at home on my website, market research, advertising. Does having a home office mean my time driving to and from showings counts as time? Is education either required or optional?” – If you meet the criteria, then that turns it from passive to non-passive. if you spend over 750 hours in a particular trade or business
- “What are the tax consequences if I sell a property in less than a year of purchase? Does the same apply to manufactured homes? And would they be able to do a 1031 exchange if there’s profit on the sale?” – What was your intent? Was it to flip? That is a different scenario than short-term gains. Manufactured homes need to look at state laws.
- “Why should I open an S-corp versus a C-corp?” – There are many differences to consider.
- “Can you please explain the 100-hour material participation in detail? You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual, including individuals who didn’t own any interest in the activity for the year.” “For example, if I materially participated in my rental activity for 100 hours during a tax year, can I claim 100% tax deductions on my losses, expenses, and my business activity under this test alone?” – No, it doesn’t work that way. You need REP status.
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Full Episode Transcript:
Toby: All right. If you are looking for Tax Tuesday, you are in the right place.
Eliot: Good to be here.
Toby: You looking for Tax Tuesday?
Eliot: I am.
Toby: All right. My name’s Toby Mathis, and this is…
Eliot: Eliot Thomas.
Toby: And we’re going to be your hosts today for Tax Tuesday, bringing tax knowledge to the masses, which is very fun. Let us know where you’re at in the world today in the chat, if you can. Make sure that everybody out there is kicking, and hopefully you guys are having a great Tuesday and you’re having a great week.
What’s the best week? You look at this, from Maine and Arkansas. Denver, Oklahoma, Minneapolis, Cleveland, Chicago, San Francisco. Now they’re going too fast. Vancouver, Washington, Honolulu—I’m jealous—Silicon Valley, inflation central, Dripping Springs, Glendora, Greenwich, Lake Forest. We got people from all over the place. Midland, Texas. Thanks, James Woods. Isn’t he famous?
Anyway, I’ll just give you guys a what’s up. We have a bunch of accountants. Let me see, we got Troy, Patty, Matthew, Jen, Jeffrey, Arash, Rachel, Jared, Tanya. We got a whole army of tax professionals to answer your questions. All you have to do is go into the Q&A and ask a question.
If it’s really detailed, like you’re asking us to start doing basically work on your return, no, you have to become a client. If you just have general questions, like here’s somebody who’s gave a book…
Eliot: We’ll give that one to Troy.
Toby: Troy, you can have that one. Troy with love, it’s after the tax season. It is after tax season. Look at that, it’s the week after tax season. They’re in recovery mode. If you have general questions, we answer. You can email them in when we are not doing the show, which is we do this every other week at taxtuesday@andersonadvisors.com. We’re answering all those.
Eliot: Yes, we are.
Toby: It’s a lot of them.
Eliot: There are, yup.
Toby: We just do that because we’re crazy. We’ll keep doing it until we sober up. We like to just take out the hurdle of having to pay somebody and doing a bunch of the crazy stuff. It’s easy for us to answer questions. Easy for you to ask them.
If this is your first Tax Tuesday, could you give me a thumbs up? Let me know if this is their first Tax Tuesday out there. If we stream on YouTube, not everybody can, there are a few, all right, you guys are there, I’ll give you a thumbs up. Welcome. This is your first one. This is just meant to have a little bit of fun and answer a bunch of questions. Eliot here picked a bunch of questions, right?
Eliot: Yes, I did.
Toby: I have to give him.
Eliot: He says that now.
Toby: Yeah. When we read them, sometimes I’m like, were you drunk? Hopefully.
Eliot: Just cough syrup.
Toby: Cough syrup?
Eliot: A lot of it.
Toby: A lot of NyQuil. Did I ever tell you my NyQuil story?
Eliot: No.
Toby: Bad things happen. I took a NyQuil by accident instead of a DayQuil. It was one of those things where I was talking and blah-blah-blah-blah-blah, and you’re like, okay, you got a guy that’s horrible cold. Going out to dinner, so I grab it. It didn’t really register that it was one of the green pills and not one of the orange ones, so I thought I’d trick everybody by having a vodka Red Bull. Get a Red Bull, it’ll wake me up because I’m starting to feel this dang NyQuil. Do not ever have vodka with a NyQuil. That’s your free advice. I remember waking up my head against the wall at a stall in a bathroom.
Eliot: I think the instructions say something about that too.
Toby: Yeah, don’t do it unless you want to have an out of body experience. It was not good. That’s not Tax Tuesday.
Eliot: That’s just Vegas.
Toby: Vegas. That’s the most tame thing we have here. NyQuil. All I know is that it was a very interesting experience that I will not be doing again. All right, let’s read the questions.
“We rented our house last year due to damages caused by the tenant violations of the agreement. We evicted them.” They trashed your house. “The tenant abandoned the property with their belongings.” Of course you really wanted those belongings. I really wanted those sacks full of whatever it was. “With proper judgment and the sheriff’s help, we evicted them and cleaned the property. The tenant caused too much damage. Can we include the cost of fixing it on our taxes?” Yeah, we’ll go over that. We’ll give you all the rules and the good, the bad, and the ugly, which was probably your home when these tenants got done with it.
I’ve had a few of those tenants, so I can sympathize. I’m like, really? Is this what you did? Who raised you? I always want to go find him and scold him. You didn’t have to do that.
“I work from home. I already take deductions for my home office. If there is a repair in the house like plumbing or an appliance repair, am I able to take a percentage of that repair off as a deduction?” We will answer those as well as these.
“In 2022, I bought and rented a rental property, but I never put the property on my tax return. Can I now add this property to my tax return and take advantage of the tax deductions, cost of ownership, et cetera? Is there a limitation on how far back someone can amend a tax return or add a rental property purchase in the past?” Great question. There are a couple of options. Always interesting when I get into these with tax people.
“My parents live in Singapore and are not US citizens. They want to give me and my kids $200,000.” Thanks mom and dad. “They have not previously gifted us any funds. Will any of us need to pay tax on this?” Great question, and we’ll answer that.
“Is there a different procedure to buy a residential multifamily with a pizzeria?” Yes. We get pizza. Some of you guys know that we always use pizzerias in our examples here. Somehow you guys snuck it in. You get a start. They just get free services for life. “Is there a different procedure to buy a multifamily with the pizzeria running downstairs?” Oh, my gosh. It’s coming out there.
“We have our long-term rental properties with LLC. How should we proceed with this? Can we do a cost segregation study and take bonus depreciation on this type of property and take advantage of the passive deductions?” Somebody managed to sneak a pizza in. We’ll answer that one too.
Eliot: That had no impact.
Toby: Just stop with the sound effects. It’s too much. “What type of activities can I log toward REP (real estate professional) status, as a real estate agent? For example, working at home on my website, market research, advertising. Does having a home office mean my time driving to and from showings counts as time? Is education either required or optional?” Great question. We’re still kidding.
People actually like pizza. I like pizza. If you like pizza, give me a thumbs up. This is how we know. I’m going to test you guys. I’m in Philly. You got to like your pizza. I’m out here in Vegas now, but I grew up in Philadelphia. Not the same out here. They always say, this is New York pizza. It’s like, no, New York’s a long ways away, buddy.
Eliot: This is from Anderson.
Toby: This is Las Vegas pizza, it’s desert pizza. There’s a coyote on that, I think. “What are the tax consequences if I sell a property in less than a year of purchase? Does the same apply to manufactured homes? And would they be able to do a 1031 exchange if there’s profit on the sale?”
Eliot: A little twist there.
Toby: Thank God I got you here to answer the questions because I don’t think I’d do so good today. “Why should I open an S-corp versus a C-corp?” You just grabbed the most open-ended question. We just spent an hour on that.
Eliot: We’ll just hit the highlights.
Toby: We’ll end at midnight. All right. “Can you please explain the 100-hour material participation in detail? You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual, including individuals who didn’t own any interest in the activity for the year.” They’re citing that by the way. That’s actually one of the tests.
“For example, if I materially participated in my rental activity for 100 hours during a tax year, can I claim 100% tax deductions on my losses, expenses, and my business activity under this test alone?” Great question and we will answer it.
Speaking of answering stuff, look, there’s my YouTube channel. If you would please sign up, we’re streaming this live right now. I think if you clicked on the live tab, you could absolutely jump on there. But if you like the videos, I think I publish two or three a week, usually three, sometimes four, depending on how ambitious I’m feeling.
I tend to be more focused on tax and financial planning a lot more in the last few years on the financial planning, because there’s so much crap information out there. I also feel really strongly that with the empty money supply continuing to increase and the deficit of the United States being at $1.8 trillion, they’re going to continue to print money, which means assets are going to go up for the foreseeable future. We’re going to have bad inflation.
You really have to be investing, otherwise you’re going to be behind the eight ball, and you’re never going to be able to buy a new house. If you’re Gen X or you’re suffering right now, this is a way out.
Clint, my partner for 20-something years, 25 years, does a channel that’s almost exclusively on real estate asset protection. If you would, sign up for both of those. That way, you’ll get notified. Put the little bell. I think you click a bell or something like that. Subscribe and click the bell. I’ll let you know whenever there’s a new video out so that when new content comes out, you’re notified and you’re like, yay. It doesn’t go to your inbox. We don’t pester you like that, it’s just YouTube.
If you want to learn how to use entities and all the tax strategies that go with real estate investing, just about every weekend, we teach tax and asset protection. I do it. Brent Nagy, Amanda Winalda, Clint, myself, we all rotate around and we do these courses on how to use LLCs, land trusts, corporations, the tax ramifications, how to do legacy planning, living trusts, personal residence, privacy trusts, land trusts, Wyoming statutory trusts, asset protection trusts. The whole gamut, we do those.
You can see right there that there are two one-day courses coming up, and then we also have our three day live in-person event. I’m going to say four days because if you are a client, there’s a fourth day. If you want you can just go to the fourth day, which is a client appreciation event. We’re going to do a cocktail hour on the 7th after the 3rd day. The folks that are going to do the 8th day, and then we’re going to do networking.
We’re going to do a bunch of joint exercises. We’re going to learn about mission, vision, and values in creating some targets, working through problems together, and helping you guys create a little bit of a team to help you move forward. That will be on December 8th, but that one’s only available to clients, so you have to be a client to get notified.
If you want to do that one, I’m certain you could reach out in chat and say, hey, Patty, I’m curious about the eighth. Could I just go to that? Yes, you could do that.
Eliot: Do they need to bring their NyQuil?
Toby: No, do not bring NyQuil. Do not bring NyQuil to the cocktail party. It would be fun.
Eliot: There’d be stories.
Toby: There’d be stories. It’s not true what they say about Vegas. It doesn’t stay here. What happens in Vegas usually follows you home.
Eliot: The courthouse.
Toby: Yup. It smacks you over the head. In some cases, it reaggravates every few months, whatever it is.
All right. “We rented our house last year. Due to damages caused by the tenant and violations of the agreement, we evicted them.” They trashed your house, that’s all you got to say. “The tenant abandoned the property with their belongings.” They got out while they could. “With proper judgment and the sheriff’s help, we evicted them and cleaned the property. The tenant caused too much damage. Can we include the cost of fixing it on our taxes?” What do you say?
Eliot: Quick answer, yes. A little bit more involved than that. We really have two categories, repairs or improvements. Repairs. Toby, I think, just did a video on this so he can go more in depth, but basically repairs are, as you think of, you’re just fixing it to how it was. You’re not really improving it or anything, making it better. It’s just getting how it was before Eliot broke it or something like that. Improvements. There, we can deduct that immediately. No questions asked, that’s an expense.
Improvements on the other hand, now we’re adding a little more work to it. Maybe it’s improving value or something like that, the lifespan of that particular piece of property. There, we’re typically going to have to capitalize or depreciate over time. You’re going to deduct it, but just not all at once, perhaps. There are a couple of safe harbors.
Two off the top of my head, the $2500 de minimis election, which just says if that particular expense or cost, be it repair or improvement, it was under $2500 for that one item, then typically you can go ahead and just expense that. There’s also the safe harbor maintenance. If it’s something that you repair several times over 10 years or something like that, there’s another safe harbor there that will often allow you to go ahead and expense that as well.
Toby: Yeah. When somebody trashes your house, it really comes down to, am I improving the property? Am I doing a complete restoration and bringing it back like new? Or am I just fixing the damage that they caused? If it’s fixing the damage they caused, it’s a repair. At the repaint, they trashed the carpet, I’m just fixing it. You’re going to be more than likely just fine writing those things off as a repair expense.
Where you get into issues is when you’re bettering the property or doing a complete restoration, or if you’re adapting it to something else. Those are actually technically the three tests. Did I better the property? No, I just fixed it. Did I adopt it for another use? No, I want to rent it and they trashed the place. Did I do a complete restoration? No, I just fixed what they broke. It was in working condition before, now it’s in working condition again. It doesn’t matter how much it is. I’m not worried about de minimis, I’m just fixing it.
There are three safe harbors. There’s routine maintenance, which I think you alluded to. If more than once during the useful life of the asset, you think you’re going to have to do that work, then that work becomes a repair. You have to figure out the useful life of whatever that item is. If it’s the house, obviously the useful life is 27½ years in that case. I don’t think we’re able to do anything on that.
The other assets, the 15-, the 5-, and the 7-year property, if you’re having to swap it out every time you have a tenant and your tenants change out every two years, then that’s going to be routine maintenance. You’re going to write off your carpet and things like that. The de minimis safe harbor is $2500.
I will say this, that some of our clients qualify for the increase, which is $5000. The $5000 de minimis safe harbor just means if I spend on an invoice $5000 or less, it’s a repair. I make an election on my return, and the IRS can’t review it. It’s done. It’s a repair.
In order to qualify for the $5000, you just have to have financials that are kept not for tax purposes. Usually, if you have a portfolio loan or something, you’ll qualify for that higher level.
Again, I’m looking at this and I think unless they trashed your walls, you ended up fixing your walls, and you just said, hey, you know what, these walls were already bad, so I just re-drywalled my whole place, you’re going to get to write it off as a repair. If you did that and you replaced it, all the walls or just did a complete remodel, then I think you’re safe.
If you did do the complete remodel, then we’re going to have to be careful because chances are that’s a complete restoration, and then that would be written off over its useful life.
I understand what they’re asking. It’s always this weird facts and circumstances thing, but with a little bit of knowledge of just knowing those little nuances, you can make sure you don’t miss stuff. Don’t go too crazy.
“I work from home. I already take deductions for my home office. If there is a repair in the house like plumbing or an appliance repair, am I able to take a percentage of that repair off as a deduction?”
Eliot: As a general matter, yes. Home office, I always immediately jumped to the administrative office. Maybe we’re doing a reimbursement. That’s a different answer than a home office, though, until we pointed that out right before the show. I always jump at that.
But if we have a true home office, I got a sole proprietorship, and I’m taking a home office deduction, then as long as we use the actual cost and calculate that, then we could probably do a repair. If it was related to the whole house, yeah, we take a percentage. If the repair is related to the room itself, we might be able to take 100%. If it’s related directly to the office, then that would be your home office.
There is a safe harbor on that home office, in which case we wouldn’t be able to do any of that. The IRS just gives this arbitrary amount, I think it’s $3 per square foot or $5. It even maxes out, I think, at $1500 total. There, we wouldn’t be running into that.
Outside of that, administrative office, that kind of thing, being reimbursed for it, certainly percentage if it has to do with the overall house, yeah, we probably could throw that in there. If it’s directly related to the office, more than likely we get 100%.
Toby: Let’s say you have a home office, you’re doing an administrative office in the home, and it has a refrigerator in there. You have a little wet bar. You have to fix the wet bar. It broke, it started leaking. That wet bar and anything that’s attached to it, so the electric and the plumbing that’s attached to it, takes its useful life of five years or less. If you fix that, that’s 100% deductible because it’s part of that office. If it’s your refrigerator in your house, it’s in your kitchen, then it’s a question of how much of that office as a portion of the total.
There are a bunch of different ways to do this. If it’s an administrative office in the home and we’re being reimbursed for an S-corp, C-corp, LLC taxed as an S or C-corp, if I’m getting reimbursed, it’s a different equation. In which case, we look at the net usable square footage of the house, or we use room methodology, whichever is best for you.
Let’s just say 20% of the house is being used as an administrative office, which isn’t really 20% of the house, it’s 20% of the rooms that are available in that house, then you’d be at a write off 20%. You’d be reimbursing yourself up to that amount. You would add it all up, you’d reimburse yourself, it’s tax deductible to the company, and it’s non-taxable to you. That’s how it works.
Again, facts and circumstances. I hate to say it, but a lot of these things really matter as to, okay, are you a sole proprietorship? Are you a partnership? Are you an employee of an S-corp, a C-corp, or is that an LLC taxed as either of those? Same difference. Those things actually matter and they create a difference.
If you need us to point you in the right direction, I don’t say this much on the Tax Tuesdays, we do free consultations, guys, especially if you’re on Tax Tuesday. Patty will share out. I think she has a link. I should actually have asked Patty. Patty, if you have a link, maybe just share it out with everybody.
If you want someone to look and see if there’s any way that we could help or look at your situation, by all means, just get a consult. Just have one of the senior advisors, business advisors, take a look at it and see if there’s anything that we could see that’s low lying fruit. There she goes. There you go, free consultation.
Eliot: Can’t beat that.
Toby: I guess if we paid you technically. Yeah, let’s talk taxes, here’s $1000. It’s the same thing because we do something called Tax Saver Pro, which is a program along with the tax advisors. They do a deep dive and tear up your tax returns.
I just did the average. It was $41,000 of tax, not of money, not tax deductions, but $41,000 of tax savings on average for the folks. There are probably 300 of those that we’ve done deep dive on, and that’s pretty extraordinary.
I was thinking it might be like $10,000 or something like that, but there are some that are huge. They skew it, but still, it’s a really considerably high number of how much money, not tax deductions, but how much money in your pocket we’re able to find. That’s per year, right?
Eliot: Yeah. If we don’t find it, you get your money back.
Toby: Yeah, Tax Saver Pro is like that.
Eliot: It’s pretty easy.
Toby: Same thing. Get a free consult. See if that’s something that you’re even interested in. If you think that you’re probably overpaying taxes, my guess is you’re probably right. Usually if you have a hunch, you’re like, gosh, you know what, it just feels like they’re just taking such a huge piece, have somebody look at it. At least you know.
I’ll tell you guys a good story. He was a fighter pilot. He got into being an angel investor. He was a grad of West Point and really high energy. He was an older guy when I sat down with him, but he was overpaying about $25,000 a year. He was making a considerable amount of money.
I looked at it and it took me all about three seconds to figure out that he was like, why are you structured this way? Considerably, I just didn’t lose the calculation. I said it was about $25,000 a year. He goes, there’s no way, my accountant’s great, and we got the accountant on the phone.
I asked him the same question. He goes, yeah, he probably could save it. The client just lost his mind, like was turning purple. He just said, why didn’t you tell me? For 20 years, the accountant had been doing his taxes. The accountant just said, you never asked. That’s a true story. I was over at McLeod. I was just sitting there going, holy cow.
Eliot: They teach those pilots composure. I bet he was about ready to lose it.
Toby: Yeah, it was just interesting. I was like, hey. If he had taken it at any time to anybody that really knew what they were doing, someone like us, it would take us less than 10 minutes. You would have seen that, you would have said, fix that.
Eliot: It sticks out.
Toby: Yeah, it was pretty obvious. It’s nothing magic, it’s just either you know it or you don’t. Sometimes little things like that could end up putting a lot of money in your pocket.
All right. “In 2022, I bought and rented a rental property, but I never put the property on my tax return.”
Eliot: There was an oversight.
Toby: No, it happens. I’ve actually done that once. “Can I now add this rental property to my tax return and take advantage of the tax deductions, cost of ownership, et cetera? Is there a limitation on how far back someone can amend a tax return or add a rental property purchased in the past?”
Eliot: Quick answer again, yes, you can. Is there a limit to how far back? Yes, I’ll hit the limit first, three years from the date that you filed. If we extended back in 2022, that would give us all the way to October of 2023. When we filed our return, you’d have three years from there to go back and get this. That’s our limitation time-wise.
Going back to the first part of it, how do we take care of this? It’s interesting that this is 2022 and it’s a rental. If we actually were putting it in service there, because it was the first year that you put it into service, you can go back and take bonus depreciation, do a cost seg, and all that. You don’t have to do it. It’s not a change of accounting because you’re picking. Now, when you put it on your return, the initial depreciation, so it almost works in your favor. I wouldn’t advise doing this, but yes, you can go back and get that.
Even if it hadn’t been the first year, you could still go back and get it in there. Maybe we couldn’t do the cost seg or a change of accounting then, but here under this fact pattern, I think you’re good. You’ll be able to put it there on the return, catch up on the depreciation. Like I said, you can maybe even do 100% bonus depreciation being it was 2022.
Toby: Even if we found this out later, we have folks that will do this for 5–6 years. They’re like, oh, no, you could still catch up and grab all that depreciation that you should have taken and take it all in that year. Here’s why you need to, because you may depreciate a property, but you must recapture that depreciation. Whether you took it or not, any amount that you were entitled to take, they will tax you on.
In this particular case, let’s just say this individual did this for 10 years and then they were like, oh, I never took any deductions. The IRS is going to say, you could have taken $50,000 of deduction. Let’s just use that as a hypothetical. You’re going to pay us an ordinary rate up to 25%, so up to $12,500. Not only did you not get the tax deduction, but you’re going to have to pay tax on it. That’s like a kick in the shin.
Eliot: Exactly what I was thinking.
Toby: Not pleasant. All right. “My parents live in Singapore and are not US citizens. They want to give me and my kids $200,000.” Do you think it’s me and my kids is both?
Eliot: I think it’s me, my kid, and the kids’ family.
Toby: “They have not previously gifted us any funds.” Why’d you throw that in there? You just ruined it.
Eliot: Making up for it now.
Toby: They never gave us anything.
Eliot: Christmas with light.
Toby: “Will any of us need to pay tax on this?”
Eliot: Generally speaking, I don’t know of a tax necessarily if you have non-US citizens giving cash gifts over to their children or family. Even if there was, in this situation, because I see parents, plural, two of them, they could each give $18,000 to all these people identified here. We have the person asking the question and kids, plural to, at least two. At worst case, at $18,000, $36,000 for each of them, that’d be over $100,000. You just do that right now, then the first week of January you’d fall under the $18,000 rule, so you’d be safe there.
I’m not aware of any tax necessarily but just giving the gift, the cash out front anyway, although there are a lot of warnings about it. Maybe some people actually do it through their international business and give the gift. That could become taxable. They may think that was for some service. A little warning there, you want to be aware of that and be careful.
Toby: Non-US citizen giving money to a US resident or citizen. First up, if you live in the United States, if you have a green card, if you’re a citizen of the United States, you have to pay tax on your worldwide income. For the recipient, we don’t care where you’re located. If you’re a US citizen or a resident, we don’t care, but gifts are not taxable. There are inheritances, sometimes it could be taxable depending on the state you live in. I think there are five or six states that still do some of that nonsense, but not under these circumstances.
I’m reasonably certain that the only thing you have to worry about is disclosure. Let me explain. The US has no jurisdiction over non-US citizens that are giving something to a citizen. They can’t tax them because they’re not here. There is no tax under those circumstances. If they were a US citizen or green card holder, they would have a unified credit amount that they can give during their lifetime. Right now, I think that’s $13-some million. It’s an extraordinarily high sum that you can gift away.
We don’t have to get into that because they’re not here. They’re not subject to US tax. All we really have is disclosure. I believe if you receive more than $100,000 from a non-US citizen that you have a disclosure. I forget the form, but I believe that you have to disclose it. Basically say, gey, I got this. I’m sure Hunter did one, probably not. Can’t help it.
You’re supposed to disclose. If they give you something that’s foreign, if it’s a bank account, if it’s property overseas, and things like that, you may have what are called FBAR disclosures. If it’s over $10,000, you’re going to have to disclose it.
For example, if they gave you $200,000 in a foreign bank account, then you have to disclose that every year on your taxes or you’re subject to a penalty. What is that penalty? It could be up to half of the balance in that thing. It’s pretty nasty, state plus penalties and interest.
If they’re giving you money, even if it’s not taxable, please be careful. Please let your tax preparer know because if that money is sitting in Singapore, for example, then we want to make sure that there’s a disclosure. What’s the form for the FBAR?
Eliot: I honestly don’t remember.
Toby: You have to listen to this. It’s not taxed, it’s just that the US wants to know everything nowadays.
Somebody was asking a question about the Corporate Transparency Act. They’re tracking real estate transactions that are done with cash. They’re tracking who’s the beneficial owner. It’s just nuts right now. They just want to know everything about everybody if they can.
What do they do with that? I don’t know. I think less disclosure is better. Wait a second, there’s the pizzeria. All right. See if I got my things ready. I’m just kidding.
Eliot: We’re good to go.
Toby: “Is there a different procedure to buy a residential multifamily with the pizzeria running downstairs? We have our long-term rental properties with LLC. How should we proceed with this? Can we do a cost segregation study and take bonus depreciation on this type of property and take advantage of passive deductions?”
Eliot: There are different ways to look at this, but you have basically residential rental upstairs. We got the pizza down below. That’s probably commercial. You’re probably renting out that commercial space. The depreciation there is going to be over 39 years to begin with. That’s the starting spot for the residential. That’s going to be 27½ years. It’s residential, so take the cost of it divided by 27½. That’s your depreciation.
For both, you can go ahead and do a cost segregation study, see if it would be in your favor—usually it is—and do bonus depreciation. That’s going to speed up. That’s going to create a massive amount of deduction across the board for both of these.
Then yes, if you’re not a real estate professional and materially participating in all this, those would be passive deductions, and you could offset against passive income. Maybe if you own the pizzeria as a passive investor or something, maybe you might be able to to match those up.
There are some different rules when you’re on both sides of it, the rent, it’s your building, and you’re renting it as well. We’d want to be careful of that. Generally speaking, yeah, you’d be able to take the bonus depreciation and use passive deductions perhaps in any passive loss limitations.
Toby: There’s one thing if you own the pizzeria. Let’s say you bought a residential multifamily and you’re self renting, you can actually group potentially because we’ve got to look at it and say if it’s basically the whole property or I think it’s incidental, I forget the exact test, but incidental, then you could actually take the pizzeria, group it with the rental, and actually use the rental losses against the pizzeria, even if you don’t qualify as a real estate professional. It’s called a grouping election to treat it as one enterprise, and you could do that when you’re self-renting.
If you don’t self-rent, then you’re going to be dealing with real estate professional active participation, depending on what your AGI is. You might be able to take some loss against your other income. Otherwise, it’s going to be passive loss, and you can use it against your other passive income. It doesn’t change that much unless you’re self-renting.
If I just happen to have one that’s doing commercial and mixed use, it doesn’t really change much of the equation, although you can lump it all together. If you’re renting a pizzeria and you have residential multifamily upstairs, it’s still considered rental activity, you don’t have to separate them out. You just have different depreciation schedules for the part of the building that’s pizzeria versus part of the building that’s multifamily.
Eliot: I know the pizzeria didn’t have any impact on getting the question here.
Toby: Pizza time. Do I get free pizza? That’s what I want to know. It’s FinCEN Form 114. Thank you, Benit and Troy, who said, hey, if you’re doing FBAR, this is what you do. It’s fantastic. Look at these guys. There’s Johnny on the spot. We’ve got a bunch of accountants out there, internally and externally. We always have folks from the profession joining us. I don’t know because we’re sick, I imagine.
Eliot: I think we got Amanda on YouTube.
Toby: Amanda’s on YouTube?
Eliot: Yes, she is.
Toby: Amanda’s on YouTube.
Eliot: I don’t think she’s in our little list here.
Toby: All right. Hi, Amanda. Nice to not see you. No, she’s great. “What type of activities can I log towards REP status as a real estate agent? For example, working at home on my website, market research, advertising. Does having a home office mean my time driving to, from, showing, counts as time? Is education either required or optional?” Great question. What say you?
Eliot: A lot of detail here. We’re talking about REP, real estate professional status. Typically, that’s going to have to do with our long-term rentals. That’s what we’re looking at. That’s the world we’re at here.
The idea behind that is traditionally, long-term rents are a passive activity. If you have a passive activity, likely you’re going to have passive losses due to things like depreciation, and those losses can’t be deducted anywhere except for against other passive income.
One of the steps away from that is being a real estate professional. If you meet the criteria, then that turns it from passive to non-passive. What is the criteria? Properly for real estate professional status, if you spend over 750 hours in a particular trade or business that’s real estate–related, and they list out in the code 469(c)(7)(c), I think it’s about 11 different occupations, and real estate agent would be one of them. You could be doing that.
If you owned that real estate agent business or at least 5% of it, your hours would be counting towards your 750 hours that you have to get. Also, it has to be over 50% of your work week, basically. All that in the real estate agent. If you’re putting over 750 hours, this would work. What kind of activities? Everything you list here, I think, would probably count, market research, advertising. As long as it’s directly related to you being a real estate agent, I think you’re probably good there.
It might be a little bit different if you’re a CEO, you want to put the time for cleaning, and things like that, the IRS does have a little bit of a frown on that if it’s something that’s really not your position. But here, you’re running your own business. You’re the real estate agent, so I would say anything related that will probably count, especially if you own the business because you are the sole person running that. I’m not too worried about that.
As far as the drive time, I love that question because that’s one of the most difficult ones when we’re looking at this. Another part of real estate professional, 750 hours, 50% of your work week, and then you have to also materially participate in managing your rental properties themselves.
There, when you’re going to manage your rental properties, I believe the time counts for driving if it’s local. It doesn’t mean you could fly across the country and count that travel time. But if it’s local, I’ve seen some cases where I think they’re going to count it.
Here, you’re not going for that material participation. You’re going for material participation in your real estate trade or business. I’m not so sure if that time would count for commutes, but because you do have the administrative office or home office here, it does count for deductions and reimbursement if you have an accountable plan.
As far as education, yeah, we can certainly deduct that, especially after the first year, I think, continuing education, but the time doesn’t count. Be very careful putting time spent for education into your hour count for REP status.
Toby: I want to break it into two pieces. Piece number one, prong number one is real estate professional, 750 hours, more than 50% of your personal service time, and you materially participate in those businesses.
You’re a real estate agent as long as you own more than 5% of your real estate brokerage, wherever you’re getting your paycheck, or maybe it’s just you as a real estate agent, then you’re going to qualify easily. You have to meet 750 hours and materially to participate.
The time that you commute, which isn’t commute time, but if you’re traveling between offices, so the time that you’re driving to showings and back to your home office, that counts. That’s prong one.
Prong two is, am I materially participating in my rental properties? We aggregate them all together, otherwise it’s per property.
Let’s say you have a bunch of rental time or rental properties. Let’s say you have five of them. We’re going to treat them all as one activity. Now we have an issue. Does the time that I’m traveling to showings count towards material participation there? No, it does not. Does education count towards that? No, it does not, unless the activity you are doing is for your rental property.
From what I’m seeing, you’re not managing the properties. If you’re managing the properties, there are cases where they let you count all of the time that you spent on the business if it was a business that was handling your rental activities.
Let’s say you were a property manager and you handled 20 of your own properties. To be the property manager, you need some licensing, and it was part of your business, or for some other folks, they would let you count all the time to keep your management license towards your material participation on your properties if that was the case.
From what I’m seeing, that’s not necessarily the case. You’d be okay with prong one, real estate professional. Did you materially participate? Which is not a hard test to pass. It’s a hundred hours. You’re not going to need all the time technically. You’re just going to have to make sure that I am managing.
I’m engaged in reviewing the leases, saying yay or nay, fixing the property, cleaning up the property, going down and actually working on it when you are looking for the property, acquiring the property. If I can add up all those hours and if it’s more than 100 hours or more than anybody else, then I meet with a material participation test.
There’s prong one, real estate professional, prong two, material participation on my rental properties. Aggregate them together. Sometimes the time works on one and it doesn’t work on the second prong.
I know it’s confusing, guys, that’s why you have to have professionals that know this stuff. When you’re telling them information, they’re immediately saying, was it this or this? Okay, if it’s this, then it’s over here. If it’s this or this, it’s over here.
Don’t try to get one over on anybody. Just tell them the truth and then they’ll help you. They’ll be able to say, all right, here’s where you’re at, here’s what you need to do so that we can make sure you’re in the right spot.
All right. “What are the tax consequences if I sell a property in less than a year of purchase? Does the same apply to a manufactured home? And would they be able to do a 1031 exchange if there’s a profit on the sale?”
Eliot: Looking at the first question here, tax consequences. If you had it less than a year, we’re going to need to know what was your intent when you purchased it. If you intended this as some kind of a flip, you buy it, maybe you fix it up a little bit, immediately sell, and the whole idea is to get rid of it, that’s going to have one aspect where we call that ordinary income subject not just to income tax but also employment taxes.
What if it was the idea that you’re going to hold it for long-term as a rental or something like that? That has a little bit of a different approach. If you sold it in less than a year, typically that’s going to be capital gains, but it’s going to be short-term capital gains, which are taxed at your ordinary tax bracket rate. No real benefit there other than it’s not subject to employment tax like the flip was.
Now we go on to our second question. What about manufactured homes? Then I’ll hit the 1031. Manufactured homes, how they’re going to play out in this is you have to look at the state law. Usually, if there’s some attachment, you’ve grounded it or something like that, the wheels are off, you’ve put on a cement base, they call that more of being affixed to the ground, and now you’re looking at a regular rental.
You’ll still have the short-term or long-term capital gains on it, or if it was a flip that that all stands still, but then could we do a 1031? We can’t do 1031 with inventory or a flip property. When you flip, that’s just inventory. There would be no 1031 if we’re under that branch. Again, if it was a long-term hold, typically, yeah, you could do a 1031 as long as it’s affixed to the ground. If it’s not affixed to the ground, it’s personal property, and personal property cannot do a 1031.
Toby: The answer is less than a year, it’s ordinary income unless it qualifies as an investment property, in which case, then it would be qualified under a 1031, even if it was held less than one year. If you bought it with the intent to sell it, then it’s going to be ordinary income as trade or business income, ineligible for 1031 exchange and subject to employment taxes.
Eliot: Yeah, there it is.
Toby: There it is. Boom. That’s it. That’s how it is. Not what everybody wants to hear. Hey, here’s something that everybody should want to hear. Join us for the tax and asset protection workshops. We have two coming up, October 26th. Is that this weekend? Yeah, it is. Join us this weekend. I guess I’m teaching it with Clint, the November 2nd, and then we’re doing the live event in Vegas, three days.
Come to Las Vegas and hang out with us. You get to hang out with a bunch of not only us because we’re fun, but the other attendees are way more fun. It’s usually anywhere from 300–500 people that are investors and like-minded. It’s always a kick in the pants to get to hang out with people that are doing the same things you’re doing all over the country.
How many of you guys have been to a live tax and asset protection event? Give me a little thumbs up if you’ve been to a live tax and asset protection event, the two day, the three day live, or the four day live. A bunch of them. Okay, cool. They’re fun. Take my word for it.
We’re going to do one on December 8th for clients. If you’re already a client, you’ll get notified, which is more of a networking event. We’re going to do some fun exercises together. You’re going to build up a bit of a team and be able to work with each other a lot more. Those are always fun.
All right. Somebody says they’ve only been to virtual. You should come to the live one. Different, (a) it’s three days, (b) it’s in Vegas. There’s always fun stuff to do in Vegas, and you get to meet a whole bunch of people. You’re going to meet so many people and everybody’s really cool. I’ve always found that there are no bad people. When you’re around really good investors who are cool, they’re just having fun, everybody seems to be in really good spirits. We have a lot of givers here.
One of the great things is this type of work. When people are successful, they tend to do nice things for other people. It’s fun to be around that. There’s not a lot of desperate, kind of that weird energy that goes on when you’re doing the get rich quick stuff. This tends to be people who are like, hey, I just want to make sure I have a legacy, I want to protect the assets that I have, and I want to build it systematically and do the things I want to accomplish. Those are fun folks to hang out with. Nobody’s trying to make a million dollars off your back.
All right. “Should I open an S-corp or a C-corp?” Could you do it anymore open-ended?
Eliot: No, I anticipated this, but nonetheless, I thought it was a good question. Just hitting the rough basics. Why would you do an S-corporation? You probably have ordinary income. We talked about that. It’s going to be taxed at your regular ordinary tax bracket rate plus employment tax, maybe with a sole proprietorship. We put it in an S-corporation, where we can limit how much is subject to the employment tax.
In the S corporation, you have two branches of income, one being your W-2 wage. You pay yourself a wage. The other being a distribution, which is not subject to employment tax, wage would be. We take a sole proprietorship, which is subject to 100% employment tax, put it in an S-corporation.
Theoretically, we could then cut that employment tax in half because only half of it, the reasonable wage is subject to unemployment tax, plus it’s in a corporation. That means we can do different deductions and reimbursements. We could do an accountable plan reimbursement, we can do corporate meetings under 280A and things like that, which will help lower all that, save you tax, get your cash back in your pocket, and it flows through to your return. You do file a separate return, 1120S. That’s a flow-through entity, which means it just all comes onto your 1040 to be taxed. That’s why a lot of people like the S-corporation.
C-corporation on the other hand, similar in that it files its own return, an 1120, but it’s not related to your 1040. It has absolutely no connection. You can have your money come in there. You could pay yourself a wage if you wanted to. Maybe you don’t want to, but if you did, you could. If you did get paid a wage, you could contribute to retirement plans. I guess you could do that for the S-corporation as well.
A C-corporation has the corporate meetings. It has the accountable plan like we just talked about for the S-corporation, but it also has a medical reimbursement plan. If medical is important to you, you might want to thank C-corporation because you can get those out of pocket, medical expenses reimbursed to you, things that are very difficult to deduct, if not impossible, on your 1040 if you’re itemizing.
That’s normally what we look at. Is it ordinary income? Do you have enough to justify a return? Maybe $20,000–$30,000, or something like that to get off your personal return. It lowers the chance of an audit too, and then you look at those reimbursements. If medical is an important issue, maybe C-corporation. If you rather have it flow through to your 1040, you’re happy with the corporate meetings, and things like that, then probably an S-corp.
Toby: I’ll make it really simple. S-corp flows onto your return, C-corp pays tax at 21%. If you want to pay yourself the profits at some point, you’re going to pay long-term capital gains on that net. If you’re a high income person, chances are it’s not going to change much.
The big difference between the S-corp and a C-corp to me, and this accounts for LLCs taxed as S-corps, LLCs taxed as C-corp, is that a C-corp, if you sell it, could qualify as a small business stock. You don’t have to pay a tax on the first $10 million of capital gain. If you sell a business, that’s a C-corp as long as you hold it for five years.
If you’re in architecture, health, legal, accounting, they don’t let you do it. There are certain fields where they say you can’t do it, but in just typical business, if you’re going to sell your business, quite often we’re going to start with a C-corp.
Or, because it’s a flow through, if you’re in a high tax bracket, we’re probably going to look at a C-corp. If you have high medical expenses or a dependent that has more than $20,000 a year in medical expenses, we’re probably going a C-corp, even if we have to do a C-corp and an S-corp, because there’s a tax reason and a benefit by doing it that way.
Why should I open an S-corp versus a C-corp? That’s it. We try not to make it too complicated. Again, we could probably spend a day on that. Here’s the differences. Here’s how losses are treated. We can get into that. Here’s how the compensation is treated. Here’s how benefits are treated. Here’s the difference, all sorts of fun stuff.
Eliot: Good time for a consult.
Toby: Yeah. If you’re raising money, if you’re going to have investors, if you have other owners, then there are restrictions on who can be a shareholder of an S-corp, or that’s not there for C-corp. There are a number of considerations, it’s just really sitting down. Somebody says, how about a partnership? Stop it.
You always take a look, and you get a pretty good idea depending on what industries people are in. You see the same thing. In real estate, it’s pretty straightforward. If you’re a realtor, you’re going to be taxed as an S-corp, either going to be an LLC or an S-corp, depending on your state and whether there are restrictions, whether you’re a broker, whether you’re an agent.
If you’re going to build up a business, sell it. If you’re going to have other shareholders, if you’re raising money, all those things, you start narrowing things down pretty quickly. And it’s just talking to somebody who doesn’t.
Does the $10 million gain from sales in a C-corp apply to LLC taxed as a C-corp? Yes, and it does apply. It works like a charm. Actually, that’s the minimum. We’ve had folks. Was it $42 million?
Eliot: Yeah, I think it’s five times, isn’t it? Is it four times, five times?
Toby: I forget the multiple, but it is. It’s 10 times the basis or 5 times the basis, but we had a guy that was $42 million, sold his business, and managed to qualify. It’s always nice when you think you’re going to be paying Uncle Sam close to $10 million and you don’t have to. It’s always like a day to celebrate.
“Can you please explain the 100-hour material participation in detail? You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual, including individuals who didn’t own any interest in the activity for the year.
For example, if I materially participated in my rental activity for 100 hours during the tax year, can I claim 100% tax deductions on losses/expenses in my business activity under this test alone?” I’ll let you answer, but I’m just going to say no. It doesn’t work that way, but go ahead.
Eliot: That’s exactly right. Here, we’re talking about rental activity. We need to have real estate professional status. We have to have over 750 hours, more than 50% of our work week, and then we have to materially participate in our rental management of our properties as well. There, whenever we’re using the material participation test, we could use the 100 hour test, but we have to reach all those other statuses in order to be able to take this as a deduction. Strictly on this, no, you would not be able to.
If by rental, you’re a little confused and you meant short-term rental, and maybe you were materially participating in a short-term rental that you oversaw over 100 hours more than anybody else the time they put in, then yes, it would. With rental activity, that means long-term rental. No, you would not.
Toby: Remember earlier, I talked about two prongs. There’s prong one, real estate professional, prong two is materially participate in your activities. You have to materially participate in your trade or business, but then you also have to materially participate in your rental activities. Rental activities is if you have a manager, a lot of people think it’s 100 hours for the manager. No, it’s the individuals that work for the manager.
Even if you have a property manager and they have two or three people that work for them, maybe more, you’re looking it down to those saying, are any of those folks doing more than 100 hours? That’s your big fight. You need to get up to 100 hours, and we combine spouse time. This is not the same as prong one, which has to be met by one spouse. Prong two, material participation on your rental activities is both spouses together. You could each do 50 hours and meet the 100 hour test.
You’re looking for anybody else, any other individual. Does any other individual spend 100 hours? If not, no, but that doesn’t mean that you get to ignore prong one. Prong one is at 750 hours and 50% of your personal service. You still have to meet that.
Whenever we’re talking about material participation, we’re talking about like when you’re doing a short-term rental loophole. This is the same test. You have materially participated in your Airbnb if you want to make the loss non-passive, otherwise it’s just a passive activity.
What’s a great example of it? We open up a pizza shop. Eliot flips the pies, I do nothing other than eat the pizzas and cash my checks. I’m passive. I do not materially participate, which means I’m passive. Flipping the pies, materially participates, he’s active. I could actually take my passive.
Let’s say I’m getting passive income and I have passive losses from my real estate. Guess what? I don’t have to be a real estate professional. I can literally use those passive losses against my income made from my passive activity as a pizza owner.
Which is why a lot of wealthy people invest passively in multiple businesses that are creating income because they may not be a real estate professional, but they have real estate losses. They’re saying, hey, I have an appetite for this other type of income, because I don’t have to pay tax on it.
Every time I get a distribution from our pizza shop, I know it’s not going to be taxable because I have all this real estate that’s kicking me all these passive losses, and I get to use it. That’s how these folks think.
If you want to learn more about stuff like that, join my YouTube channel. I think Patty shared the link before. You should probably do it again. If you’re not a subscriber, please subscribe. It helps with the algorithms and gets that information spread out to more individuals, and then you’ll also get notified.
We do this, Tax Tuesday, live on YouTube. I think we have more people on YouTube right now than we do on the Zoom. There are a lot of folks that go to the YouTube channel and watch it there, and then they’re dealing with Amanda. Hopefully she’s not getting smushed too hard, because I’m looking at our guys. We have Matthew, Jen, Patty, Arash, Jared, Jeff, Rachel, and Tanya all answering questions. We’re still 14 open questions, we’ll get to them. Do not worry, we’ll make sure that we answer your questions.
Just to give you a little bit more to think about, feel free to join Clint Coon’s YouTube channel as well. He puts stuff out a couple of times, a few times a week on real estate asset protection. He’s very good at breaking that down and making it understandable. If you want to know all that fun stuff about LLCs, land trust, living trust, corporations, Wyoming statutory trust, how it all works, feel free. These are free. Absolutely free.
No, you don’t get bugged. Of course, we already asked you twice to join us for the tax and asset protection workshop. This will be a third time as a charm. Join us when you can. We love to have all of our folks, especially our clients go in at least once a year, go in and get a refresher on how these things work, how the structures work, and how they can benefit you.
All right. If you have questions in the next two weeks, which we’ll be back in two weeks, go ahead and email them to taxtuesday@andersonadvisors.com. Know that Eliot here picks those. You may get picked.
Eliot: I read them all.
Toby: He goes through them and he picks them out. There are probably several hundred that come in every couple of weeks. If you have questions and you want to see if you get it right on the air, go ahead and do it. If you have any other questions or do you want to visit Anderson Advisors, just go to andersonadvisors.com.
If you would like a consult, we do free consults for you folks that come to Tax Tuesday. A free consult is a tax and asset protection consult. They look at your entire thing. You may say, but I only have tax questions. Let’s look at the whole thing. You don’t know what you don’t know. Let’s take a look. We break it down in pieces. We’ve been doing this for 27 years.
We’ve learned a few things and we follow a process. We do the risk reduction formula, we create a blueprint. We’re looking for specific things that you might be leaving on the side of the roads. We can get you back and get you some better benefits. It’s absolutely free. You can feel free to jump out there. I think Patty just put that into the chat too, aba.link, tax, assets.
Again, if you want to just have somebody take a look, even if your structure looks tight, you’re like, man, I’ve got the best tax people, best legal, have somebody just give it fresh eyeballs. If they say, yeah, that looks great, now you know. If they say, hey, you could try this, maybe there’s something that could benefit you that they didn’t see.
The only reason is because I’m always seeing stuff that a lot of really great people miss. You’re like, oh, I miss stuff. That’s why I asked these guys to review so much of my stuff, I’m always looking at going, am I missing something here? It’s great when somebody says, no, it’s even greater when somebody says yes, because then I can learn something and I appreciate that. I like to learn something.
All right, guys. That is it for Tax Tuesday. There are still a bunch of open questions. Why don’t we give all of the folks answering the questions? Patty, Matthew, Jen, Jeff, Arash, Jared, Rachel, and Tanya, could you guys give them a big heart? They don’t get to talk. Basically, they’re images on my computer and they answer a lot of questions. Some of them are really hard. These are not easy questions.
“If you use a portfolio loan from Schwab from investments to buy rentals, is that interest deductible with the rental or investment expenses?” It’s from the rental. If you’re using it for the rental, you get to write it off on your Schedule E on your rental expenses, which is always fun. See? Thanks, Troy, for selecting that one. Those are the types of questions that are sitting there in the question and answer that they’re answering all day long. It’s a lot of fun. I’m going to say bye. You want to say bye?
Eliot: Goodbye.
Toby: We’re going to mute ourselves and let everybody else answer questions. We’ll end the Tax Tuesday this way. We’ll keep it open for those of you who have open questions. Keep sticking through, they will answer your questions, and then we will end formally when the last question is answered. Thanks guys, and we’ll see you in two weeks.
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