Federal Tax

This message has been cross posted to the following Discussions: Federal Tax and ncCPAp on the GO! .
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I just got a referral for a new client but I'm not sure how to handle the tax filing for this situation.  I have not spoken to the prespective client yet.

The client has a personal residence in which they were in arrears on the real estate taxes.  To prevent the foreclosure on the property they needed to get a loan ASAP.  I'm not sure but they may not have even qualified for a residential mortgage.  Anyway, the ony way the person helping them was able to get a loan for them immediately was to put the personal residence into an LLC.  I was told that the LLC was required to avoid being in violation of usuary laws.  No matter what the reason the personal residence is in the LLC now.

So my dilemna is how do I handle the tax reporting for this situation because the property is a personal residence.  As far as I know there is no income in the LLC.  Do I file it on Form 1040 Schedule E and take deductions for interest expense and real estate taxes.  Do I take depreciation since the property is really not in service?  Do I get them to pay themselves rent?  Paying rent to themselves obviously isn't arms length and kind of defeats the purpose because it will negate some if not all of the deductions they would normally get if the home was not in the LLC.  Or maybe I should ignore the LLC and treat the LLC as a Nominee for the individual and just report the interest (hopefully it's a mortgage but I'm not sure) and real estate taxes on Schedule A.

I would appreciate your feedback.  Thanks.

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Allen Hoffman, CPA
LAWRENCE HOFFMAN, CPA PC
Roslyn NY
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They go on the schedule A assuming they are deductible. You will have to see if the loan is secured by the property and does not exceed the limits.

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Robert Brown
ROBERT N. BROWN, CPA
Jericho NY
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Original Message:
Sent: 1/19/2015 5:41:53 PM
From: allen@Lhcpapc.com
Subject: How to Report Single Member Real Estate Activity

This message has been cross posted to the following Discussions: Federal Tax and ncCPAp on the GO! . ------------------------------------------- I just got a referral for a new client but I'm not sure how to handle the tax filing for this situation.  I have not spoken to the prespective client yet. The client has a personal residence in which they were in arrears on the real estate taxes.  To prevent the foreclosure on the property they needed to get a loan ASAP.  I'm not sure but they may not have even qualified for a residential mortgage.  Anyway, the ony way the person helping them was able to get a loan for them immediately was to put the personal residence into an LLC.  I was told that the LLC was required to avoid being in violation of usuary laws.  No matter what the reason the personal residence is in the LLC now. So my dilemna is how do I handle the tax reporting for this situation because the property is a personal residence.  As far as I know there is no income in the LLC.  Do I file it on Form 1040 Schedule E and take deductions for interest expense and real estate taxes.  Do I take depreciation since the property is really not in service?  Do I get them to pay themselves rent?  Paying rent to themselves obviously isn't arms length and kind of defeats the purpose because it will negate some if not all of the deductions they would normally get if the home was not in the LLC.  Or maybe I should ignore the LLC and treat the LLC as a Nominee for the individual and just report the interest (hopefully it's a mortgage but I'm not sure) and real estate taxes on Schedule A. I would appreciate your feedback.  Thanks. ------------------------------------------- Allen Hoffman, CPA LAWRENCE HOFFMAN, CPA PC Roslyn NY -------------------------------------------