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Rental Real Estate (401)
Author: Holmes F. Crouch
Pages: 224
List Price: $19.95
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  • Summary

    RENTAL REAL ESTATE (T/G 401) covers all of the basics of Schedule E (Form 1040) with respect to income, expenses, and depreciation of rental residential and nonresidential real estate owned by individuals and professionals; emphasizes loss limitations, owner participation rules, Section 1031 exchanges, and installment sales. Also covered:

    • Tracing/allocating carryover losses
    • Shared equity & out-of-state rentals
    • Sharecropping & farmland rentals
    • Exchanges via "equity balancing"
    • Installment sale "contract price"
    • Awareness of depreciation recapture

    Table of Contents
    Rental Real Estate
    Book:  401
    
    Table of Content:
    
    1.  IMPORTANT BASICS                                    1-1
    
        Ownership & Title                                   1-2
        Recordation of Ownership                            1-3
        Specificity Among Co-Owners                         1-5
        Typical Rental Uses                                 1-6
        The “Second Tax” Distinction                        1-7
        Classed as “Passive Activity”                       1-9
        Real Estate Professional                            1-11
        The $25,000 Offset Exception                        1-12
        Suspended Losses                                    1-14
        Entire Interest Dispositions                        1-15
        Using Carryovers Strategically                      1-16
        
    2.  DEPRECIATION ALLOWANCE                              2-1
    
        Historically Confrontational                        2-2
        Section167:  Old Law                                2-3
        Section 168:  New Law                               2-5
        Land:  Nondepreciable, But--                        2-7
        Establishing “Land Fraction”                        2-8
        Segregating Improvements                            2-10
        When “Placed in Service”                            2-12
        “Allowed or Allowable” Explained                    2-13
        Setting Up Your Schedules                           2-14
        Form 4562:  Of Limited Use                          2-15
        Repairs vs. Improvements                            2-17
        “Adjusted Basis” Explained                          2-19
    
    3.  SCHEDULE E (FORM 1040)                              3-1
    
        Overview of Page 1                                  3-2
        Headnote Re Form 4835                               3-5
        Line 1:  Description(s)                             3-6
        Line2:  Personal Use?                               3-7
        The 14 Day or 10% Rule                              3-8
        Depreciation Separately Entered                     3-9
        Footnote 1:  Form 6198                              3-11
        Footnote 2:  Form 8582                              3-12
        The “Totals” Column                                 3-13
    4.  INCOME & EXPENSES                                   4-1
        
        Variants of Income                                  4-2
        Separate Income Ledger                              4-4
        Separate Checking Account                           4-6
        Overview of Expense Categories                      4-7
        Codifying Your Expense Checks                       4-9
        Five Self-Evident Categories                        4-10
        Auto and Travel                                     4-11
        Commissions and Fees                                4-13
        Wages and Salaries                                  4-14
        Taxes and Licenses                                  4-15
        Repairs:  Caution Required                          4-17
    
    5.  LOSS LIMITATIONS                                    5-1
    
        When Does “Loss” Occur?                             5-2
        Why “Property by Property”?                         5-3
        At-Risk From 6198                                   5-5
        Introduction to Form 8582                           5-6
        Exception 1 to Form 8582                            5-9
        Exception 2 to Form 8582                            5-10
        Statutory “Exception 3”                             5-11
        The $25,000 Allowance                               5-11
        Computing the Aggregate Loss                        5-14
        The Pe-’94 Rules Remain                             5-16
        Allocating the Allowable Loss                       5-17
        Treatment of the Carryovers                         5-18
        Disposition Accounting                              5-19
    
    6.  VACATION HOME RENTALS                               6-1
    
        The “Trigger” Question                              6-2
        Overview of Section 280A                            6-3
        General Disallowance, With Exceptions               6-5
        De Minimis Rental Use                               6-7
        Determining Fair Rental Days                        6-8
        Fair Rental Expense Allocations                     6-9
        Subsection (e) Actual Wording                       6-10
        Now for “Catch-22”                                  6-11
        Qualified Rental Periods                            6-12
        Renting Rooms in Your Home                          6-13
    
    7.  SHARED EQUITY RENTALS                               7-1
        
        Owner-Occupant:  Tenant                             7-2
        Ownership:  Tenants-in-Common                       7-4
        Rental to Family Members                            7-6
        Must Own “Appurtenant Land”                         7-7
        Written Agreement Required                          7-8
        Basic Contents of SEFA                              7-9
        A Parent-Child Example                              7-11
        “Must Make” Separate Payments                       7-12
        Owner Differences:  Schedules A & E                 7-13
    
    8.  FARMLAND RENTALS                                    8-1
    
        Rent in Noncash Form                                8-2
        “Typical” Sharecropping Arrangement                 8-3
        Introduction to Form 4835                           8-4
        Three Leadoff Questions                             8-7
        Gross Farm Rents Defined                            8-8
        Nonproduction-Type Rents                            8-10
        Many Expenses Allowed                               8-11
        New Vistas in Depreciation                          8-13
        If Net Rental Loss                                  8-15
    
    9.  OUT-OF-STATE RENTALS                                9-1
    
        Auto and Travel                                     9-2
        Local Management Contract                           9-3
        IRS Form 1099-MISC                                  9-4
        Employing a Resident Manager                        9-5
        Local Consultants on Tap                            9-7
        Another Expense:  Security Safe                     9-8
        Co-Ownership Accounting                             9-10
        What About Foreign Rentals                          9-12
        Foreign Tax Treaties                                9-13
        State-of-Residence Adjustments                      9-15
    
    10. SECTION 1031 EXCHANGES                              10-1
    
        Must Be “Like-Kind”                                 10-2
        Section 1031 Overview                               10-3
        The Core Statute                                    10-5
        Money & Nonlike Property                            10-5
        Equity Balance:  Step 1                             10-7
        Taxability of “Boot”                                10-8
        Adjusted Basis:  Step 2                             10-9
        Time Restrictions                                   10-12
        Multiple Parties in Escrow                          10-13
        Basis Transfer:  Step 5                             10-14
        Comprehensive Example                               10-16
        Must Use Form 8824                                  10-20
        Realty Reportings:  1099-S                          10-21
        Where on Form 1040?                                 10-23
    
    11. INSTALLMENT SALES                                   11-1
        
        Installment Prerequisites                           11-2
        Code Section 453                                    11-3
        Introduction to Form 6252                           11-5
        Computation of Gross Profit                         11-7
        Mortgages and Other Debts                           11-8
        “Contract Price” Explained                          11-9
        Gross Profit “Ratio”                                11-10
        Taxable Part of Installments                        11-11
        Keeping Track of Payments                           11-13
        Premature Dispositions                              11-15
    
    12. OTHER DISPOSITIONS                                  12-1
    
        Death Tax Consequences                              12-2
        Related Party Dispositions                          12-3
        Section 1231 Dispositions                           12-4
        Importance of Form 4797                             12-5
        Form 4797: Parts I and II                           12-7
        Form 4797: Part III                                 12-9
        Illustrative Recapture Example                      12-11
        “Bite the Bullet” Time                              12-13
        First Disposition: All cash                         12-14
        “Strategy 4”: Problem Properties                    12-15
        Out-of-State Exchanges                              12-16
        Charitable or Public Gifting                        12-17
        “Strategy 7”: Next-to-Last                          12-18
        Your “Final” Exchange                               12-18

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