If two people own property equally who live in different states divide expenses ...?

Question

from renting the property out and claim it on their invidiual income taxes as a deduction. One would claim one half and the other would claim the other half. Can that be done?

Answer 1

well, does your partnership agreement state that each of you own 50% of the parcel? what documentation do you have just in case the irs audits either you, he, or both of you?

i GUESS you can do this. but if i lived in your skin, i'd get advice from a tax consultant, preferably a CPA or a tax attorney. also, i'd get advice from a certified estate planner.

consider that the parcel is 100%, yes? if the two of you set the purchase up via your contract, mortgage, title insurance, and deed as tenants in common or tenants in the entirety, probably you will have no headaches. you may be able to do this too if you are JOINT TENANTS, but ask a real estate attorney as well as the accountant and an estate planner.

fyi: you can always change the way you own the property. you can change your title to reflect a really cool ownership, which is called "tenants in the entirety." essentially it is usually like joint tenancy, in that if you die, especially without a will, your interest in the estate MAY pass to your partner without probate. talk to your estate planner about that one, and to your real estate attorney. because i am telling you about this for a reason.

tenants in the entirety is when you want to own the property and manage it together and be able to take depreciation on the portion(s) that neither one of you lives in, but if the other partner accumulates loads of debt, the creditors cannot attach a lien for his debts to your real estate. if a lien is attached and you go to sell it, then the lien must be paid out of your sale proceeds. yes, even if the debts weren't yours. you see?

although i am an expert in this topic, it is quite complex to explain it here, so i will just say: be sure to talk to your tax person and estate planner about the time that you end up selling the property. you will want, i think, to capitalize on foregoing the payment of capital gains tax on your gain, am i correct? if you must pay that tax upon sale, then you have far, far less money to buy any other type of investment (or "like kind") vehicle, which means investment real estate.

essentially, the irs allows investors in real estate to sell and place their capital gains amount into an escrow at closing, then closing upon different investment real estate within a certain number of days. it's very strict. you must use the brightest professionals to get it done properly: an experienced 1031 starker exchangor, one or more Realtor (s) that are experienced in starker trades, a real estate attorney that has handled these trades in the past year or so, and your expert advisors. each one of them works with each of you to attain your financial goals. taxes get deferred each time you do a starker exchange, but someday, one of three things will happen that will trigger the irs to recapture the capital gains:

1. your estate will not wish to continue exchanging investment real estate and sell it without doing a 1031;

2. you will not pay attention to the rules, perhaps living inside of the investment property as your own residence, until so many years have passed, as provided in the rules issued by the irs;

3. uncle sam with taketh away what he had originally giveth.

just talk to a few pros, and you should be able to set things up so that what you depreciate is maximized (the LAND that is vacant surrounding your improved real estate, i.e., the building, is NEVER depreciable), giving you good tax writeoffs, as well as anything else that you have to do to offset your capital gains. any repair is not a capital improvement, but something like landscaping, which materially raises the value of your real estate, is. ask the accountant how to keep your records straight on all of this. take before and after pictures, too.

best of luck! if you have a particular, specific question, feel free to write me at my address on my profile.

Answer 2

only if you claim it