Author Topic: LLC question -- writing off furniture?  (Read 1276 times)

norabird

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LLC question -- writing off furniture?
« on: April 21, 2014, 10:04:17 AM »
My parents are in the process of closing on a condo in Brooklyn in their names. It will be 'rented' to me and a friend, but for less than the mortgage cost. My dad is currently planning to turn it into an LLC, and then the loss on the rent will be written off on taxes. I do not have the means to pay market rent/mortgage costs, the purchase is a kind of an investment/gift situation.

He also wants to essentially have this be a 'furnished rental'--i.e., they would buy the furniture, tv etc and write off the cost of that on taxes too. Is that possible?

Not quite a mustachian situation, but it's what I'm working with. I would just buy all used furniture if the write-off were not an issue.

Wondering if there's any wisdom on this topic here?

Thanks all!

Cheddar Stacker

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Re: LLC question -- writing off furniture?
« Reply #1 on: April 21, 2014, 10:10:02 AM »
Renting to a relative for less than fair market value would likely not hold up under an IRS audit. You are allowed to do this, he just might not be able to deduct any losses if it's ever questioned. There are other limitations your father might run into trying to deduct these losses depending on his total income.

In regards to the question, a typical rental property would depreciate the cost of the building and all other assets. Furniture is considered an asset, or property. It will not be "written off" or "expensed", it will be capitalized and depreciated, unless it's super cheap. If it's under $500 there are rules in place that allow you to immediately deduct them, but you need to establish written policies regarding this according to the IRS.

norabird

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Re: LLC question -- writing off furniture?
« Reply #2 on: April 21, 2014, 12:52:16 PM »
I suspected this would be an iffy proposition...I'll just try and make sure my dad has done his due diligence in getting advice from a tax attorney or real estate attorney on what is allowable, and how to do it. I really imagine that it is not the right solution or perhaps can be combined with trying to buy used instead of new.

I'm afraid the tax gains they're hoping to see from this new mortgage (first on their home is paid off now) will be less than desired or expected! But if there is a financial issue for them from that I'll try to Air BnB the tiny 3rd bedroom. Introducing another tax layer, but oh well...