Does this step-up in basis apply even if the property is held in an LLC? My tax guy told me it might not work the same way.

The step-up in basis generally applies regardless of whether the property is in an LLC or not, as long as it's what's called a "disregarded entity" or a pass-through LLC for tax purposes. If you have a single-member LLC or a multi-member LLC that files as a partnership, the step-up should still apply. Where your tax guy might be cautious is if you have an LLC that's elected to be taxed as a corporation. In that case, the rules get more complicated and the step-up might not apply in the same way. The ownership is of the corporate shares, not directly of the real estate.

Wait but didn't you also make money on the property appreciation itself? Seems like you're only looking at one piece of the puzzle.

But doesn't this mess up your book value in Quickbooks for future years? If you don't depreciate it at all in Quickbooks, won't your financial statements show an asset that should be fully depreciated?

That's a really good point about the book value. In January of the following year (2023), after you've filed your taxes, you should go back to Quickbooks and add a manual depreciation entry that matches what you took on your tax return. This way, your financial statements will reflect the proper book value going forward. Think of it as keeping two separate depreciation tracks - tax depreciation (handled in TurboTax) and book depreciation (which you'll update in Quickbooks after filing). The key is to not have any depreciation in Quickbooks during the import process to avoid duplication.

Is there any chance Congress extends the 100% bonus depreciation? I've heard rumors they might keep it at 100% to help small businesses, but haven't seen anything official.

There's always a possibility that Congress could extend the 100% bonus depreciation, but I wouldn't count on it. While there have been some discussions about extending certain business tax benefits, nothing concrete has been proposed regarding bonus depreciation specifically. The phased reduction (100% to 80% to 60%, etc.) was built into the original Tax Cuts and Jobs Act legislation with the specific intent of gradually reducing the benefit. For planning purposes, it's safer to assume the reduction will continue as scheduled unless you hear official news about an extension. If you have planned asset purchases and can move them up to qualify for the higher percentage, that's the more conservative approach.

That's a really helpful perspective I hadn't considered. Our son is financially responsible, but this might be valuable info for friends in different situations. Does a Spendthrift Trust still avoid probate like a regular living trust?

Yes, a properly structured Spendthrift Trust still avoids probate just like a regular living trust would. The main difference is just the added protection and control over how and when distributions are made. Many people don't realize that these specialized trusts can be created for reasons other than disability - sometimes it's just about protecting someone from their own financial decisions or from predatory relationships. The important thing is that they offer the same probate-avoidance benefits while adding an extra layer of protection.

Did adding your daughter trigger a property tax reassessment in your county? In our area, parent-child transfers get an exclusion from reassessment, but only if you file the right paperwork within a certain timeframe.

No reassessment in my case, but that's because I filed for the parent-child exclusion with our county assessor's office. You have to file Form BOE-58-AH (at least in our county) within 3 years of the transfer to claim the exclusion. If you miss that window, they can reassess the property to current market value, which would have increased my property taxes by about 400% given how long I've owned my home! Definitely check your local rules and don't miss any deadlines.

I've thought about the nonprofit route but honestly it seems overwhelming. Do I need a lawyer to set that up? And would I have to have an actual board of directors with meetings and all that? It's just me running this little gallery out of a converted garage, so it all seems like overkill, but maybe I'm underestimating the benefits?

You don't absolutely need a lawyer, though having one review your paperwork is helpful. There are services that can guide you through the process for much less than attorney fees. And yes, you would need a board of directors - typically minimum 3 people including yourself. They could be friends or family who support your mission. For a small operation like yours, you might consider fiscal sponsorship instead. This is where you operate under an existing nonprofit's umbrella. You'd maintain creative control while they handle the administrative/tax side. Many community arts organizations offer this service for a small percentage fee. This gives you many nonprofit benefits without creating an entire organization structure yourself.

Not a silly question! But unfortunately it's not quite that simple. The IRS looks at the overall pattern and intent, not just whether you charge something nominal. Charging $1 admission that doesn't come close to covering costs might actually reinforce that it's a hobby rather than a genuine profit-seeking business. They look at your overall approach, whether you have business plans, separate accounting, etc. It's more about demonstrating genuine business intent rather than just token income.

Technically you can file as soon as the season opens IF you have all your documents. But employers aren't required to send W-2s until January 31st. So unless your employer sends them early, you'll need to wait. Don't file without all your documents! I made that mistake once and had to file an amendment, which was a huge pain.

Thanks for clarifying! I'll wait till I have everything then. Don't want to deal with amendments or worse, getting audited for missing information.

I filed early last year too and got my refund in 2 weeks with direct deposit. But I have a super simple return with just one W-2 and standard deduction. I think complexity matters more than when you file.