From a reader:

Subject: A small favor

 

Mr. Kerstetter,

 

Kerry, please take a moment and review the content of our website: www.realestate4ira.com. I would be interested in knowing if you were familiar with these types of investments? If any synergies exist that we should discuss? And, if there would be any interest among your associates and Tax Guru Blog readers in knowing more?

 

Thank you in advance,
Steven Berman
Principal and Realtor

My Reply:

Steven:

Thanks for passing along that link.  As you may know if you have read any of my writings, I am a huge believer in real estate investments as the most reliable method to accumulate wealth, including in retirement accounts.  Unfortunately, most retirement plan custodians have a very limited range of investment vehicles, consisting mostly of stocks and CDs.  I have noticed a recent trend offering REITs, TICs and other fractional interests in real estate, of which I am not a big fan.  Owning and controlling property directly, so as not to be at the mercy of unknown and often unaccountable folks, is the safest way.

I checked your website and like that you cover a lot of tax efficient ways of owning real estate.  I am  a little confused in regard to your logistics of working with retirement accounts.  Do you act as retirement account custodians to handle the ownership for people or do you have a prototype master plan that they can use with their own personal financial advisors? 

I am interested in learning more about your services because I have constantly heard from frustrated clients and readers who want to use their retirement accounts for real estate investments but can’t find plans that will accommodate that.

Thanks for any additional info you can provide.

Kerry Kerstetter

Follow-Up:

Kerry,

Please call me on my cell phone when you have a few minutes during the day… I will happily explain our services to you.

Steve

I Replied:

Steve:

I was hoping for some links to textual material that I can post on my blog and website about using IRA accounts to invest in real estate.  Do you have anything written up on that, especially a list of custodians who can handle such self directed accounts?

Thanks for any info you can provide.

Kerry Kerstetter

From Steve:

Kerry,

No problem, actually that list and their links are on the Resources page of our website www.realestate4ira.com.

I would still like to take around ten minutes to discuss things with you at a 30,000 foot level. As you know we are the ones that bring the transaction together. In that role we act as a “general contractor” linking out clients to self-directed custodians, non-recourse mortgage lenders, even to accountants and attorneys and other consultants, if need be.  We have found it essential that we help provide any other resources they may require.

Ninety percent of the time we are buyers agents, but will act as selling agent for select clients. None-the-less, we are fiduciary to our clients (i.e., buyers) but are paid by the property sellers through a traditional real estate commission arrangement, nationwide.

Steve Berman

 

 

Tax Panel Backs More IRS Clout  – Real estate related tax breaks may be under attack.

Home Renovations That Pay Off When It Comes Time to Sell – It’s always good to know which kinds of improvements have the best return on investment.

IRS Going Slow Before Election – The funniest thing about this article is the ridiculously phony shock from people, including former IRS Commissioners, over the fact that the IRS’s behavior is influenced by political concerns.  I’m sure fellow victims of the Clinton IRS hit squad share my wish that such were the case; but we all know that all presidents have used the IRS to punish their foes and assist their friends.  It’s just one of the perks of the job. 

I’ve long supported the idea of allowing people to vote for NOTA rather than having to choose the lesser evil. Leaving an elected office empty wouldn’t be any worse than filling it with the kind of spendaholics that we have to choose from.

Taxifornia, here we come – And people get upset at my reference to my former home state on the Left Coast as the PRC?

Accounting students help audit white collar crimes – A great idea.  Why just teach the students about old cases from textbooks, when they can dig in and work on real life ones?  And it’s not like there’s a chance of ever running out of real life cases to work on.  Also, as every real world accountant knows, the hands-on approach will teach the students a hundred times more practical skills than any textbook study possibly can.

Q:

Subject:  C Corp questions

 

Hi,

 

I found your website while researching the following:

 

LLC filing as C-corp question

——————————————————————————–

Could you please give me some feedback on the best way to handle the following?

1. 2005 1120 was filed showing consulting fees as an expense. The consulting fees were actually paid to the sole shareholder. There is no payroll set up for the corp. How should this be handled on the shareholders return? Any changes for the corp return?

2. Sole shareholder personally owns the truck which is used 100% for this C-Corp. Mileage has previously been claimed on this vehicle in a prior year (before corp) as unreimbursed business expense. How would it be handled now that it is totally used for corp business? Could the C-corp lease the vehicle from him?

3. Home-Office deduction for C-corp? Would it be best to lease the office space to the corp?

Any suggestions are greatly appreciated!

A:

There are far too many options to consider and possible scenarios that can be used to achieve your goals for me to even begin giving you specific advice via this medium.  There are pros and cons to each of the various options you mentioned, as well as dozens you didn’t.

You will need to work directly with an experienced tax pro who can analyze your unique circumstances. In fact, you were crazy to set up your corp without the advice of a qualified tax pro because s/he could have steered you in the best direction for some things that cannot be changed, such as the fiscal year.

I wish I could help; but I already have too many clients to take care of properly; so we are still trimming back on the difficult clients and are not accepting any new ones at this time. 

Unfortunately, we don’t have anyone specific to whom we could refer you. I did recently post some names and links for some like-minded tax pros around the country.

If you haven’t already done so, you should check out my tips on how to select the right tax preparer for you at.

In regard to the consulting payments made by your corporation to you, you need to report them on Schedule C of your 1040, which, after any related expenses you may have paid personally (+ home office, etc), will be subject to the 15.3% self employment tax.  A good tax advisor can help you find other ways to draw money out of your corp that aren’t subject to SE tax.

Amending things to reclassify those payments as W-2 wages would be a very costly mistake, subjecting you and your corp to a lot of penalties with both IRS and your state tax agency; so it would be most prudent to continue with the way those payments have already been classified, as non-employee compensation (1099-MISC) consulting.

I wish I could be of more assistance; and I wish you the best of luck.  

Kerry Kerstetter

 

From the November issue of Practical Accountant:

What’s Different About Holistic Financial Planning?

Work with Clients To Prevent Fraud