If I buy investment property w/ a friend how do we split the tax write-off (can we?)?

Answer 1

To protect yourselves from yourselves (money and friendship don't often mix), I suggest you create a Limited Liability Company LLC), complete with a WRITTEN agreement of how things will be split. You will have to file an additional tax return (Form 1065, but won't pay taxes with it). The agreement should specify how the income and losses would be allocated, what will happen if the other dies or wants to get out of the investment, who wil pay if the property needs major repairs, etc. Then you will be legally able to deduct ALL income and losses on your tax reutrns (subject to the passive activity loss rules. Consult a tax professional on this for further information.

Answer 2

Jack Hoff's advice only applies if one of you uses the property as your principal residence. If you own the property as tenants in common under local law, you can split the tax deductions without creating a legal entity. As an added benefit, either or both of you can use your interests in the property to exchange for new property in a "like-kind" tax-deferred exchange under section 1031.

Answer 3

Create a legal entity that you both own equally.
Partnership, Limited Liability Company, S Corp, Etc.

Answer 4

It's hard to do. Best thing to do is hold the property for two years before you sell, then you won't get hammered with capital gaines.