Discussion:Renting a home you don't own
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| Revision as of 03:51, 27 October 2009 Denisev1220 (Talk | contribs) (He had no agreem) ← Previous diff |
Revision as of 04:18, 27 October 2009 Solomon (Talk | contribs) (In addition to T) Next diff → |
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| I guess I am tired and forgot to send it. How can I tell if this case can be used to argue his case to the auditor? | I guess I am tired and forgot to send it. How can I tell if this case can be used to argue his case to the auditor? | ||
| Thanks again}} | Thanks again}} | ||
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| + | {{ForumReplyPost|UserID=Solomon|Date=27 October 2009|Text=In addition to Trans, you might look at Uslu (TCM) and Njenge (Summary). | ||
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| + | "''How can I tell if this case can be used to argue his case to the auditor?''" | ||
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| + | The types of authority are listed in §1.6662-4(d)(3)(iii). A court case is a type of authority.}} | ||
Revision as of 04:18, 27 October 2009
Discussion Forum Index --> Advanced Tax Questions --> Renting a home you don't own
Discussion Forum Index --> Tax Questions --> Renting a home you don't own
Denisev1220 (talk|edits) said: | 26 October 2009 |
| I can't seem to find this particular problem posted. I have a client who owns 20 homes he rents. In addition to this, he bought several homes in other peoples names (relatives). He rents these homes out, collects the rent and makes the mortgage payments. The owners have nothing to do with the property.
I know client cannot take the 1098 expense because he is not legally liable for it. But he does generate income, where do I claim this? I could put it on Sch E, with no expenses, though he does have receipts for things such as blinds installed in these homes etc. It is passive, so I am thinking line 21 on the 1040 won't work. I have not done any of his returns, but am representing him in an audit. The last preparer, didn't claim any of this other income, and only claimed 4 of his homes. Any guidance on this would be appreciated. I have explained to him that even though he made the payments and there were in excess of rent received, he will still have to claim the income. Thanks | |
Death&Taxes (talk|edits) said: | 27 October 2009 |
| Use the yellow block to search for equitable or beneficial ownership.
The statement about the last preparer fascinates me. | |
| 27 October 2009 | |
| If you are managing rental property owned by another person are you not just collecting management fees and need to report on Sch C? I'm thinking in the context of the individuals who contract with owners, find tenants, collect rent, pay expenses on behalf of the owners, subtract their management fee and remit balances to those owners. In this case it appears his management fee took up the whole balance and nothing was left to be paid to owners. And he may lose on trying to deduct any operating expenses since he paid them on behalf of the owners. Possibly has some auto expenses etc. he could take. | |
| 27 October 2009 | |
| Let's hope that other preparer was in the dark about the other houses. | |
Denisev1220 (talk|edits) said: | 27 October 2009 |
| I have actually sat down and spoken to the prior preparer. She knew about all the homes. In fact, she took 101k in mortgage interest for them on a Sch C. Also put the property taxes there. She took no depreciation, said she didn't see the use since he already had a loss at 25k (which by the way, he can't take).
The Sch C she dreamt up was due to some broker co-op commissions he received. It seems the seller, developer etc. pays an incentive up front, although that amount is added to his purchase price of the home. Example. Buyer buys for 500k, there is a 5% commission involved. At closing there is a check to a broker for 25k, broker takes a few % off, and issues a check to buyer for the remaining amount. Mortgage is for 525k. I have spoken with one of the brokers to understand the process. Since the buyer is paying for that money in his mortgage, I think it would be similar to someone pulling out $$ during a refi. No tax consequence. But the broker, not knowing what to do issues 1099s. These total 385k. So preparer says she was looking for deductions against them so client wouldn't owe so much in taxes. I am not convinced the 1099s were taxable to begin with. There are even more issues with the return, but I don't have time to list them all. It is a big mess. KathiJud, client did not get any management fee of any kind. It cost him more than he brought in with rental fees. He (and the relative) consider the home to be owned by my client. It was "just" in someone elses name. Client did all the work, paid all the bills etc. made no profit EXCEPT I don't think he can claim any deductions. SO just need to know if I put it on a C or an E, and what in the world would I call this kind of "business?". | |
| 27 October 2009 | |
| Me thinks the IRS would look at "family owned" properties as:
1. He has made gifts to the named family members 2. He has not paid gift taxes. 3. Thus he has no basis in these properties. I agree with KathiJ that has to be treated as "property management job." 4. He should give each family member "losses/gains/deductions" statements to their rightful owners (so they may report it on their SchE). He may take a mangement fee, if there is a profit to be had or if the family members pay him for it. (I know over his dead body.) | |
| 27 October 2009 | |
| In addition to this, he bought several homes in other peoples names (relatives). He rents these homes out, collects the rent and makes the mortgage payments. The owners have nothing to do with the property.
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Denisev1220 (talk|edits) said: | 27 October 2009 |
He owns 20 homes of his own, but I think he couldn't get approved to buy these based on the number already owned. I am trying to confirm this though. And also to see if there are any written deals that would give him the home upon the owner's demise etc.
I found this tax court case based on information from another forum question. Pages 15-17 seem to indicate he might actually be able to deduct the mortgage interest and property taxes. Feedback is sure appreciated. I haven't yet managed to find anyone that I am connected to that has experienced this. | |
| 27 October 2009 | |
| I was reading up on equitable/beneficial ownership. He definitely took on the burdens and benefits of ownership. I think you'd need to get an opinion on whether he would have rights to ownership in these homes even though he is not on the mortgage or the deed. A signed agreement between him and the named owners would probably help. | |
Denisev1220 (talk|edits) said: | 27 October 2009 |
| He had no agreements in writing, he said he was going to, but didn't get it done. He states it was easier to qualify with other peoples names instead of his.
The court case I was referring to is here http://www.ustaxcourt.gov/InOpHistoric/TRANSDAN.TCM.WPD.pdf I guess I am tired and forgot to send it. How can I tell if this case can be used to argue his case to the auditor? Thanks again | |
| 27 October 2009 | |
| In addition to Trans, you might look at Uslu (TCM) and Njenge (Summary).
"How can I tell if this case can be used to argue his case to the auditor?" The types of authority are listed in §1.6662-4(d)(3)(iii). A court case is a type of authority. | |
