Just wanted to add a quick tip - when I did my OIC last year, I used the NADA guide instead of KBB for my car values. My revenue officer told me they often prefer NADA because it tends to be more conservative and realistic about used car values, especially for older vehicles with issues.

This is really great advice from everyone here! I'm going through a similar situation with my OIC and was making the same mistake of trying to do the math myself (good condition value minus repair costs). One thing I learned from my tax preparer is that you should also consider getting documentation from a used car dealer showing what they'd actually pay for your car in its current condition. Sometimes this "trade-in" value can be even more accurate than KBB or NADA for demonstrating true "quick sale" value, especially if your car has significant issues. I ended up getting quotes from three different places: a CarMax-type dealer, a local used car lot, and a mechanic who also buys cars for parts/repair. The lowest of those three values became my documented "as-is" value for the OIC. Having multiple sources of valuation really strengthened my case and showed the IRS I wasn't trying to lowball the asset value.

I had this exact issue! For what it's worth, I called TurboTax support and they confirmed that for real property structures, the program automatically applies straight-line depreciation because that's what's required under MACRS for buildings. The rep did show me how to access the "hidden" depreciation options though. If you go into each asset, there's an advanced settings option that's not obvious. For the building itself, you can't change from straight-line, but you can choose between GDS and ADS systems and adjust recovery periods in some cases. For personal property within the real estate (appliances, furniture, etc.), you CAN change to 200% or 150% declining balance methods once you find this menu. Saved me quite a bit in year one!

I'm dealing with a similar situation with my real estate partnership! After reading through all these responses, I'm realizing that what I thought were "errors" in TurboTax might actually be correct applications of tax law that I just didn't understand. The explanation about MACRS requiring straight-line for building structures makes sense now. I was expecting to see accelerated depreciation options like I use for equipment in my other business, but apparently real property is different. I'm definitely going to look for those hidden advanced settings that @Scarlett mentioned. I think I've been leaving money on the table by not separating out the personal property components (appliances, carpeting, etc.) from the building structure itself. Has anyone here actually done a cost segregation study? I'm curious if it's worth the expense for a smaller partnership or if that's only beneficial for larger real estate operations.

My s-corp lost almost $60k last year and my accountant specifically told me that taking a reasonable salary is STILL required even during loss years if you're active in the business. The losses just pass through to your personal return where they offset other income.

Just want to emphasize what others have said - you're absolutely doing the right thing by continuing to take a salary even during the loss year. The IRS is very clear that active shareholders must receive reasonable compensation regardless of profitability. Your brother's situation is actually pretty straightforward since he's truly inactive. No services = no compensation required. Just make sure you document his non-involvement clearly as others suggested. One thing to keep in mind: that $47k loss will flow through proportionally to both of you on your K-1s, which could actually provide some tax relief on your personal returns depending on your other income sources. The salary you're taking is actually helping to increase that loss (since payroll is a business expense), so you're handling this correctly from both a compliance and tax strategy perspective.

Just a heads up, with business acquisitions like this, make sure you're looking at asset vs. stock purchase implications too! It can make a huge difference in depreciation/amortization deductions. My accountant told me I could have saved like $150k in taxes if I'd structured my purchase differently.

Great thread! I'm going through a similar acquisition right now and wanted to share what I've learned from my tax attorney. One thing that hasn't been mentioned yet is the imputed interest rules under Section 1274. If your interest rate is below the Applicable Federal Rate (AFR), the IRS will impute a higher rate anyway, which could mess up your tax planning. Also, don't forget to consider the allocation of the purchase price among different assets (goodwill, customer lists, equipment, etc.) since different assets have different depreciation schedules. Section 197 intangibles get amortized over 15 years, but some tangible assets might qualify for bonus depreciation. One more tip - if you're planning to use Section 1202 qualified small business stock exemption down the road when you sell, make sure your purchase structure doesn't disqualify you from that benefit. It's worth having this conversation with a tax professional who specializes in business acquisitions before you finalize the deal structure.

Don't forget to look into vocational rehabilitation services in your state! When we needed a modified vehicle for our daughter, our state's voc rehab program covered about 40% of the modification costs. They won't help with the basic vehicle purchase, but they often have funding for accessibility modifications, especially if your child will eventually need transportation for education or employment. The waiting lists can be long though, so apply ASAP.

I went through this exact situation two years ago when we bought a wheelchair-accessible van for my son. Here's what I learned the hard way: You can only deduct the cost of modifications that exceed what a standard vehicle would cost, and only if your total medical expenses exceed 7.5% of your AGI. Keep meticulous records separating the base vehicle cost from accessibility features. But here's the key thing I wish someone had told me: get a detailed letter from your daughter's doctor explaining the medical necessity BEFORE you make the purchase. The IRS may question whether certain features were truly medically necessary versus just convenient. We had to go back and get documentation after the fact, which was a hassle. Also, seriously reconsider that 401k withdrawal. The 10% penalty plus taxes could eat up a huge chunk of your money. We ended up getting a medical loan at a much lower effective cost. Some credit unions have special programs for disability-related expenses with better rates than the penalty you'd face on retirement funds. One more tip: if you're buying from a dealership that specializes in accessible vehicles, they often have financing relationships and can help you understand exactly which portions qualify for medical deductions. Much more helpful than general dealers.