For a real estate tax discussion, gather the property's income, expenses, financing and ownership records. Keep investment decisions and legal ownership questions separate from the bookkeeping work agreed with the provider.
Table of Contents
1. Collect Ownership and Financing Records
Collect the property income, expenses, financing records and ownership documents needed for a tax discussion. Obtain separate legal advice before changing the entity or property ownership.
2. Review Short-Term Activity
First determine whether the activity is a rental activity under the passive-activity rules. Average customer use, services and other exceptions matter. If a nonrental exception applies, evaluate material participation separately; nonpassive status does not remove other applicable loss limits.
3. Keep Records by Property
Reconcile activity using the relevant bank statements and retain invoices, closing documents and previous schedules. Agree the bookkeeping categories and reporting period before relying on a property report.
4. Prepare Before a Transaction
Bring the proposed dates and transaction documents to the appropriate adviser. Confirm the scope of tax work and obtain separate help for ownership, financing or legal-document questions.
Additional tax and recordkeeping considerations
Depreciation and cost segregation
Residential rental buildings are generally depreciated over 27.5 years under the general depreciation system; land is not depreciable and other classifications or methods may apply. Cost segregation can identify eligible shorter-life components, but deductions depend on supportable allocations, business use, dates, elections and loss limitations.
1031 exchanges
A qualifying Section 1031 exchange can defer gain on business or investment real property; simply selling and reinvesting does not qualify. Identify replacement property in writing within 45 days after transferring the relinquished property. Receive it by the earlier of 180 days after that transfer or the tax-return due date, including extensions, for the transfer year. A qualified intermediary can help avoid receipt of sale proceeds; cash or other non-like-kind property may cause taxable gain. See the IRS Form 8824 instructions.
Build a records checklist for each property before handing work to a bookkeeper or preparer. Identify the owner, the reporting period and the accounts used to collect rents or pay costs. Mark incomplete months and explain transfers between properties or personal accounts rather than leaving the provider to guess.
Agree who will obtain missing statements and how corrections will be approved. Preserve the final reports and supporting records used for the tax discussion. If a transaction is still being negotiated, distinguish proposed figures from completed activity so the analysis uses the right facts.
Related services and resources
Bookkeeping · Tax preparation · Controller and CFO services · IRS notices, audits & strategies · IRS Form 8824 instructions
Discuss the work you need
Contact Henriquez Accounting to discuss the records, questions and services needed. Confirm the scope, fees, responsibilities and meeting arrangements before engaging or traveling. Schedule a consultation.