Questions for Aug 17 Q&A

[sushidaddy]

Some questions for your Q/A tomorrow
• If someone wants to buy a second home for around 1.3 M and finance it with a 20% down payment of $260K and with a loan of $1,040,000 in an area that I may be moving to in 2 to 3 years, what is the most tax efficient method to use to buy and finance the home:
o Buy the home as a second home and convert it to short term rental when I am not living in it as a vacation home.
o Buy the home as a long-term rental and then convert it into a primary residence when I move into it in 2 to 3 years
o Please note, I currently have a first trust deed on my current primary residence with a loan balance of $244,000
o Any other options I should consider?
• Pros/Cons for investing in an Opportunity Zone
• Pros/Cons for 1031 Delaware Statutory Trust
• Income Tax ramifications of recently passed Inflation Reduction Act

[sushidaddy]

Here are some questions that you answered for me that some of your other clients maybe interested in the answers
Can you briefly go over the different options a real estate investor has to sell a rental property and the different tax ramifications for each option? (Sell with cash out, Installment Sale, Installment Sale with seller finance and a partial 1031 exchange with the cash out, Full 1031 exchange). Especially the depreciation re-capture and what it is taxed at versus the capital gain which is taxed at a lower rate.

Second question: Does anything happen when your refinance and the amount you take out exceeds your cost basis?
Interesting point to mention: You might mention what happens when you refinance, and you do not use those funds to reinvest into the property that your refinanced. In other words, you cannot deduct the interest you paid on the refinance loan against the rental income from that property.

[Author]

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