chanp

Hello all, Thank you so much for your explanation. I get it now and am sorry for the confusion. Have a nice day.

Hello Pacun, I am still confused. I can see the point if the property is considered as inventory. However, if the property is considered as investment, I think you can only capitalize the cost to increase the value of the property. For example, it will include the remodeling cost, inspection report, building permit, utilities during the remodeling period...but insurance and property tax do not increase any value of the investment property. They should offset any investment income rather than capitalize to the cost. What do you think? Thank you

Hello samingeorgia, Thank you for your reply. I have one question. How to justify to capitalize the insurance, property tax, utilities cost and other cost into the cost of property? Those are the running cost to keep the property but the property does not produce any business income. They are not a capital improvement cost because they do not increase the value of the property. I will tell my client to pay some salary to themselves in the future. Thank you

Hello Guru, Basically, they bought an old house or fixer and then sold it at 15-20% gain. I know that if it is business income, you cannot all the expenses related to the property such as insurance, property tax, utilities ..... If it is classified as investment, I think you can capitalize the repair cost but not insurance, property tax and other misc fees/expense. Thank you

Hello Pacun, Thank you for you reply. We are talking about $100K gain in 2010. He is about 60 years old and does not have another job. The S corporation was set up in 2003 to sell internet domain name. It is still selling it but the sales is not good at all. It made a $6k loss three years in a roll. The S corporation started buying old house, fixing it and the selling it. The corporation is equally owned by my client, his wife and his son. Thank you

Hello all, I am new to S corporation. I have a client with a S corporation. S corporation had purchased 5 real estate properties and spent 3 to 10 months to remodel them in late 2009 and during 2010. All were sold in 2010. My clients are retired and hired contractor to do all the remodel works. So, they did not spend more than 750 hours in it during 2010. My questions are: 1. are they investment properties (capital gain) or inventory properties (business income)? What is the cutoff line? 2. if they are investment properties, can they deduct the property tax, insurance and utilities during the remodeling period? If not, can they capitalize it and add it to the cost of investment property? or no deduction nor capitalized at all? 3. One of the properties had a loan and paid interest in 2010. There was no investment income in 2010. So, how should I handle the loan interest? Thank you so much for any advice and help.

Hello KC, I will try it and let you know. What I did last night was to use the 6198 to calculate the allowable loss for the year 2008 and manually added a dummy K-1 (same tax ID) to enter the PYA loss (calculated from 6198 which did not flow to any form). So, I have both the 2008 income and the 2007 non-deductible loss allowed in 2008. Thank you so much. I will definitely try your way.

Hello all, I know this is very common question but I cannot find my answer in this forum. I have a client with a 2007 non-deductible K-1 loss (20000) but have a K-1 profit (1500) in 2008. I entered the 2008 K-1 in a K-1 worksheet and added a form 6198 but could not figure how to enter the 2007 loss to offset the 2008 profit and carryover the remaining loss to 2009. Last night, I had already spent 4 hours to try all the possible ways I can think of. Thank you so much