Law and taxation topics: the investment interest trap

Article Abstract:

There are two categories for the interest incurred in real estate transactions: investment interest and trade or business interest. Interest expense deduction rules for investment interest, which are less favorable than those for trade or business interest, limit the deductions to investment income before the investment expense. The investment interest trap can be avoided by capitalizing interest expense and deducting it over succeeding years.

Real estate agents and managers, Finance, taxation, & monetary policy

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Losses from short-term rentals of vacation homes: catch 22

Article Abstract:

Vacation or resort property owners who rent those properties for less than eight days, on average, face the material participation legal hurdle. Statutory language and regulations make that hurdle daunting, and the U.S. Tax Court has made it more daunting. The problems facing investors seeking to deduct losses resulting from short-term vacation home rentals are discussed.

Public Finance Activities, Tax Deductions & Exemptions, Dwelling operators, exc. apartments, Lessors of Dwellings ex Apt, Lessors of Residential Buildings and Dwellings, Management, Contracts, Real estate industry, Landlords, Vacation homes

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Investor or dealer status? It depends on where the roulette wheel stops

Article Abstract:

The best business strategy may be to remain ambiguous in status. After the financial results are tabulated, it will be possible to select 'investor' or 'dealer' status. The investor earns capital gains income and the dealer earns ordinary income. Investors are taxed at a 20% rate while dealers are taxed at varying rates.

Real Estate, Real Estate and Rental and Leasing

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