When completing your taxes, remember this:

Right again! We take 35% of each deal and put it into our 1/4ly tax account. It does not hurt so bad each year!! Should we do something different?

Michael Mangham
MD Home Acquisitions LLC

you are doing the right thing in this environment. When interest rates were high, we use to "game" the system by minimizing our payments down to the legal minimum and earn interest on the difference. But today, there is no advantage in that because you do more work than it is worth.

Bill . Thank you for your input as that is what I'm trying to focus on .

Michael . Thank you for your comment here too . It will be helpful .

Uncle Sam will be asking for more than just an arm but a leg - yikes.

Diane at the Success Academy told me about this first and told me that as long as each property is done in a separate LLC or Trust, you won't be labeled a dealer. I want to confirm this is indeed correct? Or will the IRS just look at it as a subsidiary of your main company? Do you know the rulings on these 'get arounds' in the current environment? Does this still apply?

Tammie, a very good question, so here is the basic answer I would give regarding the use of seperate entities. The basic rule in tax is the following: Constructive income. If it walks like a duck and talks like a duck; it is a duck. LLC's and trusts need to flow through to somebody as they do not pay tax at the entity level.

Seperate LLCs are great for legal liability but may not give any protection for taxable income. In theory, you have to understand why. When you buy a home as your home, any profit can be treated as a capital gain (and even deferred). However, if you're flipping houses, you are selling your inventory which is the same as if you were selling clothes or televisions, etc. There are no capital gains treatment for stores selling their goods.

However, and this is important. People believe what they want to believe (including me) because sometimes we don't know the whole story. However, whoever gives you final advice on how to create taxable strategies or prepares your taxes or gives you advice on what is and what is not taxable; make sure they are willing to pay the penalty if they are wrong.

Because I guarantee the IRS won't accept, "I heard it at a seminar" as a valid reason to accept your logic. As someone who advised clients for 12 years on the proper tax procedures and has been on too many audits (70 - 80) to remember and has been through the appeal procedure (19) for clients; the odds are stacked against you unless you have your stuff documented properly.