Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

We would like to purchase a business property to expand my…

Customer Question
We would like to...

We would like to purchase a business property to expand my current business to a second location. Should we purchase it in my name or the business name. Also I can borrow the money from a relative and use some of my own money or get a loan. Which one would be better. We have a rental property we are selling which we are going to sell in 6 mo to a year and we can pay the relative back and own it free in clear.

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

Not that I can think of.

Submitted: 4 months ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 4 hours by:
4/1/2018
Tax Professional: Cole Parker, Certified Public Accountant (CPA) replied 4 months ago
Cole Parker
Cole Parker, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 114
Experience: Certified Public Accountant
Verified

Hello! My name is*****'m currently reviewing your question.

You will receive messages in threads to follow this one.

Ask Your Own Tax Question
Tax Professional: Cole Parker, Certified Public Accountant (CPA) replied 4 months ago

Ok... first... it's best to purchase the second location using the business. Is your current business currently formed as an LLC?

Second, when you borrow money it's up to you how you'd like to finance it or pay for it. Typically, relatives charge a lower interest rate (if they charge one). So you can potential save interest, plus if you don't use a bank then it's not reported to any of the credit bureaus and therefore not counted for or against you.

So it's really up to you on how you'd like to pay for the second location. If you can sell a property and then repay the debt to your relative, then you may consider that option.

Also consider that you may owe income tax on the rental property you plan to sell. If you time it correctly, the sale of your rental property, you could benefit from a Sec 1031 exchange and defer paying income tax on the rental property.

Ask Your Own Tax Question
Customer reply replied 4 months ago
How does the second 1031 exchange work? Also what is the best way to deduct the expensive of purchasing the new property?
Tax Professional: Cole Parker, Certified Public Accountant (CPA) replied 4 months ago

To do a Sec 1031 exchange, you'll need what's called an accommodater (i.e., title/escrow company) to facilitate this transaction. What basically happens is a like-kind exchange for property. For example, if you sale a piece of land and then within 45 days identify another piece of land you wish to purchase and then close within 180 days, you will have deferred in gain subject to income tax until you later sale that land for cash.

The trick is though, you need a 3rd party accommodater to make this happen cause you're not supposed to touch any of the funds during this transaction.

As far as deducting the new property, than really depends on what you purchased. Some of it will probably be depreciated and some you can take an immediate deduction-- it all depends on what you have purchased.

Does this make sense... somewhat?

Ask Your Own Tax Question
Customer reply replied 4 months ago
We probably can't do the exchange as we will close on the new property in 30 to 45 days and can't sell the rental until the fall because we have renters in there until September first. The property we are purchasing is for a second location of our business and we would like to know about how to deduct the expenses.
Tax Professional: Cole Parker, Certified Public Accountant (CPA) replied 4 months ago

What are you purchasing with the second property?

  • Building?
  • Land?
  • Equipment of any sort?
  • Furniture and/or fixtures?

If you able to tell me this, then I can better guide you to what is deductible...

Ask Your Own Tax Question
Customer reply replied 4 months ago
It's an existing building. We will have to do some build out and then furnish it.
Tax Professional: Cole Parker, Certified Public Accountant (CPA) replied 4 months ago

The purchase price of the build is what you'll be able depreciate but over 39 years for commercial-use (as of 2017).

The best way to determine the amount you'll be able to expense on an annual basis is to take the cost of the building and divide it by 39 years. That's your expense for the next 39 years.

The build-out or add-on, will also more than likely fall under the 39 year rule. The furnishings and other little things can more than likely be expensed the same year using depreciation code section 179.

Ask Your Own Tax Question
Customer reply replied 4 months ago
Is there a way to lease the business from the first business (or from me if I buy it under my name instead of under the businesses name) if we made the second business a separate entity? It will be a second location but because it is in a different town it will have to have a different name. I have heard of people doing that. Would that allow me to deduct monthly rental payments as well as the depreciation of the building you described above?
Tax Professional: Cole Parker, Certified Public Accountant (CPA) replied 4 months ago

Yes, you can certainly do this. The second company would have rental income from the first company plus the second company would also have deprecation and other expenses.

To make it legal and pass IRS audit, if ever that happened, you'd have to have lease document in place stating the terms of the lease.

Ask Your Own Tax Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Cole Parker Your Own Question
Cole Parker
Cole Parker
Cole Parker, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 114
114 Satisfied Customers
Experience: Certified Public Accountant

Cole Parker is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,512 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,569 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
Can I do a 1031 exchange with my current investment property
Can I do a 1031 exchange with my current investment property after I've taken title with with my recently purchased investment property. If so, how soon must I sell my current investment property? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
5,665 satisfied customers
I have 2 questions, #1 I have a question, if you have the
Hello, I have 2 questions, #1 Hello, I have a question, if you have the answer and solution to my question then I would be glad to py for the service. I have a startup corporation; I have cash in the … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I am a non-resident Canadian Citizen with Card living in the
I am a non-resident Canadian Citizen with Green Card living in the US. I do have a small business in Canada that I am not using anymore for invoicing but it does have investment accounts at a Canadian… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I have a rental in Wa. state. It is clear of debt and worth
I have a rental in Wa. state. It is clear of debt and worth $200,000. I want to borrow $100,000. What are the tax consequences? Thanks J.R.Barrett… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
I currently own a rental property in North Carolina (in my
I currently own a rental property in North Carolina (in my own name) and I'm thinking of expanding my portfolio of rental properties. I am also considering flips (buying, remodeling, and selling). Bec… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Hello - We reside in California and own our primary residence free and clear, (House No.
Hello - We reside in California and own our primary residence free and clear, (House No. 1). We are in the process of purchasing a new primary residence approx. 10 miles away, (House No. 2). My in-law… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
What constitutes a hardship? In 1995 we purchased an investment
What constitutes a hardship? In 1995 we purchased an investment rental property. In 2005, my husband borrowed against the property. In 2008, my husband was diagnosed with pancreatic cancer and unable … read more
Megan C
Megan C
Certified Public Accountant (CPA)
Master's Degree
8,655 satisfied customers
My wife, who is on a very low income, is purchasing a positively
My wife, who is on a very low income, is purchasing a positively geared investment property in her name. In making application to the bank we are advised that although she satisfies the banks asset ow… read more
Expert
Expert
sold rental property at a profit, had unused interest expense
sold rental property at a profit, had unused interest expense from loans used to keep s-corporation afloat (oersonal loans), active in s-corporation, can I deduct the interest as investment interest i… read more
fastfile
fastfile
Tax Advisor
Master's Degree
550 satisfied customers
My husband and I want to buy, rehab, and sell small homes as
My husband and I want to buy, rehab, and sell small homes as a retirement business. We want to set up a 401k for the business. Does a real estate flipping business qualify under IRS rules to have a 40… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I have had a house for sale since 2007, due to a job transfer,
I have had a house for sale since 2007, due to a job transfer, that I have not been able to dump. I had a lease-purchase that fell through and had it just rented out once in order to help pay the mort… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I own a LLC for the hopeful purpose of purchasing rental properties
I own a LLC for the hopeful purpose of purchasing rental properties and creating a small real estate investment business. Although, I've done nothing with the LLC since I started it last year, I am pr… read more
Jax Tax
Jax Tax
Senior Tax Attorney
Master's Degree
1,363 satisfied customers
Using 1031 exchange funds in 2006 I purchased a 50% share in
Using 1031 exchange funds in 2006 I purchased a 50% share in a small strip mall as part of a Tenants in Common Agreement. About 6 months ago, I purchased another 15% share in this same mall (from one … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
A husband and wife who are Australian citizens have moved to
A husband and wife who are Australian citizens have moved to live and work in New York. He will be getting a green card shortly. He is looking to buy a family home to live in in New York as well as a … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I was given investment property as a settlement in my divorse.
I was given investment property as a settlement in my divorse. My ex kept the 2,000 sq ft home on 13 acres of property that we built and lived in together for 8 years of our 20 year marriage. The inve… read more
BK-CPA
BK-CPA
Bachelor's Degree
687 satisfied customers
Question How to handle condo so most beneficial tax-wise. We
Question: How to handle condo so most beneficial tax-wise. We currently own a condo that is a second home and we can no longer afford the mortgage payment, along with all the other costs associated wi… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Hello, I own a house that my son and daughter in law are buying
Hello, I own a house that my son and daughter in law are buying from me. They had declared bankrupcy a few years ago and could not get the loan to buy the house themselves. I borrowed the money for th… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Ive been transferred with my company from working in
I''ve been transferred with my company from working in St. Cloud, MN to Rochester, MN. We''ve been in our Twin Cities home for 18 years. We refinanced this home about 9 years ago on a 15 year fixed mo… read more
Ed Johnson
Ed Johnson
Senior HR Consultant and Business Devlpm
Bachelor's Degree
6,994 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x