SOme Clarification On LLC Expenses Please
A friend took his info to a CPA who is supposed to be well versed and experienced in real estate taxes.
3 years ago he bought some land, his LLC held the land and apparently was not keeping up on his responsibilities. Last year while managing I bought all the property taxes current, did some advertising and sold some of the lots.
I think that the taxes and advertising expenses are exactly that, expenses.
The CPA claims they added to the value of the property and should be counted as such. These were vacant lots that appreciated on their own and the taxes were not a contributing factor to the increase.
Is it worth the hassle to argue with this guy/ and/or get a different CPA or am I totally off base here?
[ Edited by linlin on Date 01/26/2006 ]
If your friend is an investor AND not a dealer AND if your friend itemizes his deductions on Schedule A,
then,I agree with you that the real estate property taxes should be an itemized deduction on Schedule A.I agree with the CPA that the advertising costs are selling expenses that are adjustments to the basis
otherwise (your friend is a dealer, or your friend does not itemize),all the costs you cited are added to the basis
Rehabbing and flipping is an active income activity. The S-Corp is better suited for this activity.
Owning and operating rental property is a passive income activity. The LLC is better suited for this activity.
For tax and legal reasons, you want to conduct each activity from within a separate business entity.
could you take both of these (S-corp & LLC) and bring them under some kind of a Parent corporation? I am looking to do the same thing but in addition to the above two there would also be a managment company.