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Ely, Counselor at Law
Category: Real Estate Law
Satisfied Customers: 99430
Experience:  Qualified attorney in private practice including business, family, criminal, and real estate issues.
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If a person owned two properties, the first two unit

Customer Question

if a person owned two properties, the first two unit building is rented out completely, the second three unit building is occupied only by the owner. Can the owner transfer rental income from one property to the other in order to claim it as a rental property for tax purposes or is this tax evasion
Submitted: 4 months ago.
Category: Real Estate Law
Expert:  Ely replied 4 months ago.

Hello and welcome to JustAnswer. Please note: This is general information for educational purposes only and is not legal advice. No specific course of action is proposed herein, and no attorney-client relationship or privilege is formed by speaking to an expert on this site. By continuing, you confirm that you understand and agree to these terms.

1) Define what you mean by "transfer" exactly, please?

2) Are either building under an LLC/corporation?

This is not an answer, but an information request. I need this information to answer your question. Please reply, so I can answer your question. Thank you in advance.

Customer: replied 4 months ago.
basically the owner is taking the rent from the first property and stating in the accounting that it is being received as rent from the second property in order to claim the property as a rental income. None of the assets are under a LLC or corp, but are held privately by the individual
Customer: replied 4 months ago.
the owner is actually writing a check from the bank account of the first property to the bank account of the second property to create a paper trail
Expert:  Ely replied 4 months ago.
Thank you. WHY is this being done, please?
Customer: replied 4 months ago.
basically so the owner can declare the second unrented property as rental property, giving the owner the tax write offs.
Expert:  Ely replied 4 months ago.
Thank you and my apologies for the wait.
This would be improper. What would be happening is that the IRS (and CA) would be receiving a false statement. In reality, this is false. The landlord is using their second property as a "front" for a second rental where there is none.
While normally the authorities would not even know, in the event of an audit, the landlord can expect serious penalties. I would avoid this.
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