Business Expenses

[Unregistered]

Client bought building under his name. Purpose is to open spa business.

It has been two years now. He paid mortgage and other expenses for two years.

He will open this business next month.

(1) I told him to create LLC and transfer building from personal name to LLC
Can he deduct all expenses unde LLC? (after transfer of bldg)

(2) Let LLC rent it to business

(3) Deduction:

Option 1:Can he deduct "ALL" mortgage and intrest when he files his
perosonal return for 2004 (he has not filed 2004 & 2005 return)?

Option 2: Optin 1 is not right. He needs to accumulate all expenses before starting business. Apply $5,000 rule for startup expense and amortize startup expense over 15 years.

(4) When should I start depreciating building?

Thanks!

[Unregistered]

Any help

I would greatly appreciate if some can help me.

Thanks!

[sea-tax]

Client bought building under his name. Purpose is to open spa business.

It has been two years now. He paid mortgage and other expenses for two years.

He will open this business next month.

(1) I told him to create LLC and transfer building from personal name to LLC
Can he deduct all expenses unde LLC? (after transfer of bldg)

(2) Let LLC rent it to business

(3) Deduction:

Option 1:Can he deduct "ALL" mortgage and intrest when he files his
perosonal return for 2004 (he has not filed 2004 & 2005 return)?

Option 2: Optin 1 is not right. He needs to accumulate all expenses before starting business. Apply $5,000 rule for startup expense and amortize startup expense over 15 years.

(4) When should I start depreciating building?

Thanks!

You begin to depreciate the building when the assest was placed into service. This means when your client either had the building available to rent or had a signed lease agreement.

I think placing the building into a LLC is not a bad idea and yes he can lease it back to the spa business. then the llc would report all income and expenses associated with the building and rental unit.

I am not sure this answers your question but: Lets say he bought building in 2004 and didn't rent it until 2005. I would take all expenses incurred and payed until the date he first colledted rent and add that to the basis of building and depreciate over the useful life. Then any expenses incurred after rental had begun would go on LLC or sch e what ever was applicable. In reality if he did not hold the property out for rental or actually have a rental agrrement then the property is just investment and not been placed into service.

Again I could be wrong here if I misunderstood your question. Maybe someone else has some advice.

[Unregistered]

You begin to depreciate the building when the assest was placed into service. This means when your client either had the building available to rent or had a signed lease agreement.

I think placing the building into a LLC is not a bad idea and yes he can lease it back to the spa business. then the llc would report all income and expenses associated with the building and rental unit.

I am not sure this answers your question but: Lets say he bought building in 2004 and didn't rent it until 2005. I would take all expenses incurred and payed until the date he first colledted rent and add that to the basis of building and depreciate over the useful life. Then any expenses incurred after rental had begun would go on LLC or sch e what ever was applicable. In reality if he did not hold the property out for rental or actually have a rental agrrement then the property is just investment and not been placed into service.

Again I could be wrong here if I misunderstood your question. Maybe someone else has some advice.

Thanks.

Client did not held out for rent. He is concern that he paid roughly $100,000 for mortgage and other expenses. He wanted to deduct on sch "A" as deduction but I do not see how he can do it.

If it is investment property can he deduct any where.

[sea-tax]

Thanks.

Client did not held out for rent. He is concern that he paid roughly $100,000 for mortgage and other expenses. He wanted to deduct on sch "A" as deduction but I do not see how he can do it.

If it is investment property can he deduct any where.

I do not see this being a sch a deduction.