Extend lease or buy new building?

[Texas_Signmaker]

Last reply, I don't want to hijack this thread. I will provide you with a little reading (it's a bummer you think reading is bad):

1-4. Personal attacks which are like everything else you've written, inaccurate (most likely malicious). It doesn't really matter to me what you think I do or do not know.

5. You are lying, you said "You can not depreciate the land." which is inaccurate (I figured it's just your incompetence, not malicious). I provided you with specifics on how to do it, and linked to the IRS website as a reference. So again you were wrong.

6. I don't. This is again something you clearly know nothing about. Here is the IRS explaining why the laws allow you to avoid payroll taxes on your kids if employed in an LLC. https://www.irs.gov/businesses/small-businesses-self-employed/family-help

Maybe you should let the IRS know they are wrong because you didn't know about these (AGAIN LEGAL) loopholes.

7. Maybe. I don't think being well read is a bad thing. Clearly you do, and it shows.

8. Wrong again - Here is where you should learn to read (or maybe ask that lawyer you consult with so often) - https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/FairLaborStandAct.pdf - Sec. 213 is Exceptions and states that:

Minors under age 16 working in a business solely owned or operated by their parents or by persons standing in place of their parents, can work any time of day and for any number of hours. However, parents are prohibited from employing their child in manufacturing or mining or in any of the occupations declared hazardous by the Secretary of Labor.

9. Since you don't seem to know much about business/taxes/accounting - I'm just going to assume you are also not a physicist... If I'm WRONG on that, go ahead and share your degrees.

10. Maybe you don't understand the difference between INCOME and REVENUE - the rent is REVENUE to the landlord LLC. The landlord LLC deducts expenses of the LLC (legal, maintenance, management, depreciation, interest paid on the liability, etc.) and you don't show any INCOME.

11. I won't even respond to this.

12. Congrats. Maybe you should ask the lawyer about child labor laws, since you don't seem to know them very well.

13. You are dumb, I said employee your kids in the LLC, not the sign business. Also, the tax benefit is $12,950.00 per kid for 2022 (and goes to $13,850.00 for 2023), so since you seem to struggle with numbers your $2000.00 insurance is WAY less than the tax savings... If you are wondering where that number comes from, here you go: https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023

14. A waste of my time, I have better shit to do.

If your building LLC is not making a profit renting out to the sign company, that doesn't mean you're getting away with anything. Loading up "maintenance costs" on one company means those costs didn't go on the other. It's all the same in the end. Like notareal said, it's a separation of liability is the main advantage... and that can be gone though too. I set up an LLC for a rental property I owned... so in theory if anything happened they could sue the LLC and not me personally... but there is a chance that they could "pierce the corporate vail".. which is why you have lots of insurance. There wasn't any tax savings doing it that way. I carried a loss on it but it would of been the same if I held it personally.

 

[Stacey K]

I have to lean towards DSGI on this one as far as taxes goes. I also have an LLC for my property and rent it to myself. I also have a 2 family and a storage shed attached to my shop all three rented out. I have a separate house that I live in. I always show a loss for the property as a whole. If I put new flooring in my house I use it as a deduction on the rental property. Same goes for cleaning supplies, yard fertilizing, etc. I have my house fertilized and the shop...the shop gets billed for everything and I can use it as a deduction.

When it comes to taxes I stay in the gray area, there's a reason lawmakers create gray areas, it's because they are taking advantage of them also. My Dad had 100's of rentals and has been audited. Golden rule...stay in the gray area and have a good accountant.

 

[Notarealsignguy]

I have to lean towards DSGI on this one as far as taxes goes. I also have an LLC for my property and rent it to myself. I also have a 2 family and a storage shed attached to my shop all three rented out. I have a separate house that I live in. I always show a loss for the property as a whole. If I put new flooring in my house I use it as a deduction on the rental property. Same goes for cleaning supplies, yard fertilizing, etc. I have my house fertilized and the shop...the shop gets billed for everything and I can use it as a deduction.

When it comes to taxes I stay in the gray area, there's a reason lawmakers create gray areas, it's because they are taking advantage of them also. My Dad had 100's of rentals and has been audited. Golden rule...stay in the gray area and have a good accountant.

A personal home is a different situation because personal home expenses are not write offs. If you run it through a business then it would be which is what you are doing. As far as purchasing commercial property, it wouldn't matter which LLC owned the property, the actual business or a holding company because whichever one owns it gets the deductions. There is no tax advantage in this case.

 

[F1225hgB42w]

I must have missed the part where you came after me. Straight from the IRS, land is not depreciable. Children are not exempt from withholding.
They fall under the same labor restrictions as any other employee. Paying kids who don't work to avoid taxes would likely be considered tax evasion if you were audited
You keep saying there is no income to a land hiding LLC, there is. You came at me and what I said was there is no tax benefit to buying your property in a separate LLC, it's a wash except you will likely pay sales tax on the rent and will have to pay 2 liability policies, 1 for each LLC. As far as expensing, you can take the same depreciation, tax and interest, maintenance expenses whether you hold the company in your business LLC or land LLC.
Better shit to do at 2am? Like what? Go kick the dog in a fit of rage?
View attachment 164418 View attachment 164419

Okay dumb-ass, last time:

Children get the withholdings back when they file taxes with the standard deduction - you probably knew that but wouldn't be willing to admit you were wrong (on many things). You referred to payroll taxes (which you don't pay on kids per the link i sent you - dumb shit). Again, you are disingenuous by changing the topic because you are wrong.

Again, there are specific exemptions for family owned LLCs and children working so - yes children fall under the same labor laws, you just don't know them well. Again you are wrong.

No, it's not considered tax evasion it's a very main stream process to save on taxes, again you simply won't admit you were wrong. There are literally hundreds of accountants who have written about it, just google it and take the loss.

I already pointed out in different states sales tax on rent is not applicable (as in Washington) but you should check your state laws.

Also, you don't know how to tell time, I'm on the west coast, so it was 10:30 pm dumb-ass.


good bye!

 

[Notarealsignguy]

Okay dumb-ass, last time:

Children get the withholdings back when they file taxes with the standard deduction - you probably knew that but wouldn't be willing to admit you were wrong (on many things). You referred to payroll taxes (which you don't pay on kids per the link i sent you - dumb shit). Again, you are disingenuous by changing the topic because you are wrong.

Again, there are specific exemptions for family owned LLCs and children working so - yes children fall under the same labor laws, you just don't know them well. Again you are wrong.

No, it's not considered tax evasion it's a very main stream process to save on taxes, again you simply won't admit you were wrong. There are literally hundreds of accountants who have written about it, just google it and take the loss.

I already pointed out in different states sales tax on rent is not applicable (as in Washington) but you should check your state laws.

Also, you don't know how to tell time, I'm on the west coast, so it was 10:30 pm dumb-ass.


good bye!

I'm sorry, I must have missed the part where you admitted you were wrong about there being a tax advantage to owning a property in one LLC and leasing it to yourself in another.
I never said sales tax was definite - which is why I said may. Yes, each state is different.
As far as having ghost employees on your payroll, it's already been addressed. It'd be pretty hard to explain what your 5 year old kid is doing for the compensation he is being given. Now a teenager, ehh, probably pretty easy.
Section 1.162-7(b)(1) provides that any amount paid in the form of compensation, but not in fact as the purchase price of services, is not deductible.

https://www.govinfo.gov/content/pkg/CFR-2012-title26-vol2/pdf/CFR-2012-title26-vol2-sec1-162-7.pdf

Sure, you can write off a lot of things and not get caught doing it. People expense boats, planes, RVs, home offices, mileage etc but that does not mean it is following the law. I don't give a rats ass what you do but when people come looking for advice, you give them information and they can decide if they want to follow the letter of the law or skirt it.
You're a very angry person, you should slow down before you have an aneurism. I would really miss you if that happened.

 

[F1225hgB42w]

I'm sorry, I must have missed the part where you admitted you were wrong about there being a tax advantage to owning a property in one LLC and leasing it to yourself in another.
I never said sales tax was definite - which is why I said may. Yes, each state is different.
As far as having ghost employees on your payroll, it's already been addressed. It'd be pretty hard to explain what your 5 year old kid is doing for the compensation he is being given. Now a teenager, ehh, probably pretty easy.
Section 1.162-7(b)(1) provides that any amount paid in the form of compensation, but not in fact as the purchase price of services, is not deductible.

https://www.govinfo.gov/content/pkg/CFR-2012-title26-vol2/pdf/CFR-2012-title26-vol2-sec1-162-7.pdf

Sure, you can write off a lot of things and not get caught doing it. People expense boats, planes, RVs, home offices, mileage etc but that does not mean it is following the law. I don't give a rats ass what you do but when people come looking for advice, you give them information and they can decide if they want to follow the letter of the law or skirt it.
You're a very angry person, you should slow down before you have an aneurism. I would really miss you if that happened.

I apologize for my short responses, I really shouldn't have. I agree we just disagree on things and it doesn't really matter to me or to you what each of us does. I apologize.

PS I don't agree there are NO tax benefits, but let's leave it at that.

I feel bad for hijacking this guys thread, I hope he buys a building and it makes a lot of money for him.

Have a great day.

 

[Gino]

Holy mackerel, andy...... I thought that would never end. I think you 2 should get a fightcade and duke it out, til you're either dead or minus a limb or two. I'm no accountant, CPA or tax specialist, but to be giving out this kinda information on a forum, seems at best... dumb. It would be much nicer for you to suggest things and let those interested, study it and approach their respective financial people. The mess you guys created is worse than the files csocso received for doing his job. Sheesh.

 

[Notarealsignguy]

Holy mackerel, andy...... I thought that would never end. I think you 2 should get a fightcade and duke it out, til you're either dead or minus a limb or two. I'm no accountant, CPA or tax specialist, but to be giving out this kinda information on a forum, seems at best... dumb. It would be much nicer for you to suggest things and let those interested, study it and approach their respective financial people. The mess you guys created is worse than the files csocso received for doing his job. Sheesh.

Is it really a discussion if people aren't fighting?

 

[Texas_Signmaker]

You keep saying children on the payroll, how does insurance look at having kids on a payroll? Aren't you paying workers comp on that too? I just got through a worker's comp audit and they want to know all that information

 

[RabidOne]

My 2 cents is buy the building. I have seen both sides of the situation over the years and while buying is really a long term benefit, in the end you and your family will be pretty happy you made that decision.
I worked for a publishing company that bought all the real estate for every office they were in. When the single owner decided to retire he sold the company but because he owned all the real estate as a separate company he still had that entire revenue stream from the buildings.
I worked for a printing company that did well by selling their building downtown and buying a nice new building in an industrial area for 6 million. Fast forward 30 years and that real estate is even more valuable and they sold the entire building for 35 mill.
I have seen businesses I know or worked at shut down because they didn't own the building and the lease came up. Yes you were paying 10k a month, sorry but its 35k now.
Older owners looked at the cost of moving and decide closing is easier.

 

[Stacey K]

My personal opinion is rent expense vs. rent income ends up being a wash. The advantage comes in when you start physical deductions for the building and the maintenance. Obviously a personal kitchen remodel expense can't be used for the shop if there's not a full kitchen but there's lots of other things that can be used. I deduct a lot of my personal cleaning supply expenses and use them for my shop building. Buy a new saw? Use it as a rental expense. Paint your living room? Use it as a rental expense. In 2021 the law changed and you can write off up to 250 man hours of time you spend on your rental property. That means every time you cut the grass, the time spent repairing the toilet, time spent on preparing taxes, paying monthly bills, shoveling (if applicable) etc. I keep a notebook and keep track incase of an audit. It is imperative you keep each and every receipt you are deducting. There's a lot of advantages to owning the property and hopefully the best advantage is that the property increases in value over time. I bought my shop 5 years ago and just had it appraised. The appraisal was double of the purchase price. I stuck about 12% of the purchase price into the property in repairs. Of course the market is higher now than it was but it was a great investment that keeps on giving each year at tax time.

 

[Notarealsignguy]

I have seen businesses I know or worked at shut down because they didn't own the building and the lease came up. Yes you were paying 10k a month, sorry but its 35k now.
Older owners looked at the cost of moving and decide closing is easier.

We came pretty close to that happening. The lease didn't go up but the property sold. Luckily, the guy who owned the property that we ended up buying kept hounding us to rent his building and he came in at the right time. If things didn't align like they did, I probably would have shut it down and got a real job too.

 

[gnubler]

4. You have a shady accountant.

Isn't that a good thing? Or at least an accountant who isn't afraid to go to prison. Better call Saul...

 

[Zendavor Signs]

We have a separate partnership (my dad and I) that owns the building. I thought maybe there was a small tax advantage in setting it up that way, but I'm not sure. It seems like the best advantage is having more flexibility. My dad has since retired, and he continues to get half of rental income. We had our business up for sale for a while when he was retiring. Some prospective buyers wanted to purchase the building also, some wanted nothing to do with it. It seems like it will be easier to sell the business, with the building being separate.