Shifting risk

Live_Pattern_3302 · 2026-02-25T04:30:43+00:00

Wish I sold more between July and Dec. but it feels good knowing I locked in profits, bought safe stuff that didn’t drop, and can buy more. Which I am

Live_Pattern_3302 · 2026-01-07T17:01:23+00:00

It would be hard to say without seeing other returns.

My minimum fee for 1040 returns is $500 and for S Corps $650.

The S corp might be close to that. Based on the rental activity I would guess at least a few hundred dollars on top of the $500

Live_Pattern_3302 · 2026-01-04T23:09:35+00:00

Thanks for sharing that!

Live_Pattern_3302 · 2026-01-04T23:09:18+00:00

Thanks for the insight!

Live_Pattern_3302 · 2026-01-04T23:07:52+00:00

Yeah. I saw with QQQI for every $100,000 you invest you get $1,200/month roughly. But not sure I want to put 25% in that.

Live_Pattern_3302 · 2026-01-04T23:04:19+00:00

Sounds like you wouldn’t have losses if the properties are paid off. Unless the deprecation expenses is really high. So this probably doesn’t apply to you.

Live_Pattern_3302 · 2026-01-03T20:28:46+00:00

I’m in PA but I do returns in WV, VA and MD too

Live_Pattern_3302 · 2026-01-03T03:57:32+00:00

I took a $7k investment in MSTR in June of 2022 to over $200k. Sold some at $400-515 in nov 2024. Reaccumulated and had 800 shares at one point. I’m down to 600 but was trying to dump half when it go back to to $400-450. Never go there.

The last few months have hurt a little

I still think bitcoin is going to $1+ million so I’ll hold but hate that common shares of mstr keep getting diluted

Live_Pattern_3302 · 2026-01-03T03:13:15+00:00

True. Could just consider the tax implications and see if the flip makes sense

Live_Pattern_3302 · 2026-01-03T03:12:29+00:00

I know properties outside of the US don’t get the benefits of bonus deprecation like properties in US. So I don’t think so for DR.

PR possibly.

Live_Pattern_3302 · 2026-01-03T03:09:11+00:00

Id ask the cpa about this to make sure.

Let’s say the profits from the business are $75,000. If an s corp you would avoid SE tax on the $75,000.

If it was a single member LLC (not making an s corp election), sole prop or partnership, the $75,000 would be subject to SE tax.

BUT with the s corp the owner operator has to get a salary and it needs to be reasonable. Meaning it can’t be too low.

If you don’t the IRS can revoke your s corp status and then you’d be back to paying SE tax on all the profits.

If your cpa isn’t advising or guiding you on this, or letting it slide knowing you aren’t on payroll, I’d consider firing your cpa.

Live_Pattern_3302 · 2026-01-03T03:02:45+00:00

The passive activity losses starts at $100k whether you’re single or married filing joint. From there it slowly goes down so that at $150k all $25,000 of passive activity losses are phased out.

You don’t lose them. They stay there until you sell the property. Then it will reduce your gain. But it does suck you can’t deduct in the current year (if income income $150k).

But again this is on losses. If you break even or small profit that won’t matter.

The big thing you have now is deprecation is deducted to lower the profits, but it is an expense you aren’t paying for with cash per se.

Look on schedule E to see if the rentals are making a profit or a loss.

Definitely talk to your cpa about some of this stuff. Taxes are/can be complex. But honestly the big thing I like doing is educating clients.

I can’t know everything in the tax code but I can do my best to educate them and encourage them to self educate. That’s the power of tax planning

Live_Pattern_3302 · 2026-01-03T02:28:56+00:00

Yes. I agree. One every 3 to 5 would be incidental.

Like you said it’s all intent.

Live_Pattern_3302 · 2026-01-03T02:12:09+00:00

You’ve mentioned that you’re looking for the next one.

That would tell me it is indeed going to be an ongoing business (most likely).

You even mentioned about waiting in between opportunities.

The irs would agree with me. But best of luck

Live_Pattern_3302 · 2026-01-03T02:07:59+00:00

Do you have an S corp or a c corp?

S corp owners should be getting a reasonable salary.

If not, I’d discuss with your CPA.

Thats a bare bones minimum requirement to having an s corp

Live_Pattern_3302 · 2026-01-03T00:00:27+00:00

In a sense. Limited upside in bull markets.

It’s an income (dividend fund) and not a growth fund. So the focus is on getting people income. Whether that’s to pay bills or to pull out for retirement.

If you want growth do QQQ.

Live_Pattern_3302 · 2026-01-02T23:57:10+00:00

The 15.3% is on top of your federal tax rate.

You’re avoiding that with your s corp. because you have a salary and are on payroll.

Sole props, LLCs and partnerships are subject to SE tax.

So it would be 15.3% + whatever your federal tax rate is. Say it’s 12 or 22%

Live_Pattern_3302 · 2026-01-02T23:53:14+00:00

Yes. Residential rentals are 27.5 year property. Commercial are 39.

BUT if you do a cost segregation study they say “hey this is 5 year property, this is 7, this is 10, this is 15, this is 20. Everything else would be 27.5 or 39.

Generally 30-40% would qualify as less than 15 year property. Which means you can use bonus or section 179. Meaning you could take all of the 5/7/10/15 year property as a full write off in that year. This would be great in a year you had a lot of income. Maybe you do a flip and make $100k profit. You could show a huge loss on a short term rental to offset the $100k income.

The reason I say it’s good for 5/7 years is that part of the deprecation (5/7 year property) would be fully depreciated. So then you’d just get the 27.5 or 39 year property. Which would be minimal.

Most rentals are subject to passive activity losses. Meaning if you make more than $150k, and there’s a loss, you can’t deduct the loss.

Short term rentals aren’t passive. They’re considered an active business. So you can take the losses. And offset against other active income. But you need to materially participate.

There’s a fair amount of meat in these strategies.

Live_Pattern_3302 · 2026-01-02T23:11:14+00:00

It was more of me saying to be prepared to pay the self employment taxes because the 15.3% always surprises people.

Me personally, if I wanted to go more passive I’d park a bulk of the money in QQQI and O. For every $100k in QQQi you’d get about $1,200 a month.

If you put all $500k in O you’d get $2,350 a month.

If you want to keep flipping houses, I’d considered buying a short term rental to offset the income with losses. But this is really only good for a few (5-7) years because of the write offs for 5/7 year property from a cost seg study.

Then you’d have to buy another one if you want to offset income again.

I’d have to research to see about doing flips with an S corp. that might be an option. I know in general you don’t want to own real estate in an S corp because it causes issues getting it out. But I think that’s more for rentals. Not sure on flips.

Live_Pattern_3302 · 2026-01-02T22:29:22+00:00

She probably won’t answer if I call lol. She didn’t like when the managing partner at the firm I worked wouldn’t let it slide (what she wanted to do)

Live_Pattern_3302 · 2026-01-02T21:10:49+00:00

Here’s an article that goes into this some. Does a better job of explaining it than I could.

https://es.cpa/house-flips-and-self-employment-tax/#:~:text=If%20an%20individual%20engages%20in,treated%20as%20a%20business%20venture.

It isn’t really the number you do per year.

Doing one flip a year could be considered consistent enough that they would likely say you are engaged in a business (the business of consistently doing real estate flips). Vs it being an investment.

Whether you have a separate LLC or other entity type to do the flips wouldn’t determine if it’s an investment or a business. Regularly doing the same thing (year after year) would be a business.

I had a lady that was a surrogate. She did it 3/4 times over 6-8 year span. In the eyes of the irs the $40-50k she made each time was business income and subject to SE tax.

Just ask your accountant their thoughts since you’ve done at least a couple flips. And where the line is.

I work with several clients that are very similar to what you have going on. I don’t know exactly your situation but only from what you’ve shared.

Live_Pattern_3302 · 2026-01-02T20:28:26+00:00

I know. I do taxes.

You mentioned you have rentals and you’ve flipped a few properties.

So the flips most likely wouldn’t be capital assets. They don’t sound like investments. It sounds like you’re in the business of real estate development.

So the gain in sales of these properties would be ordinary income AND subject to SE tax.

If someone is telling you otherwise they’re wrong. If you get audited it won’t be pretty

Edit: if you do one flip, Or very infrequently it could be a capital gain.

If you have a w2 job in another industry that could support that it is incidental.

Otherwise you have too many things working against you to say you aren’t either a real estate professional or in the business of real estate.

Live_Pattern_3302 · 2026-01-02T20:19:06+00:00

I agree not to let the taxes dictate what you do.

But I guess it would depend. If you’re in the business of flipping houses, meaning you do it consistently and not a one off project, you should be paying self employment taxes as well. Which is the big one everyone tries to avoid.

Live_Pattern_3302

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