Can I just add that if you're making decent profit through your LLC (like over $40k), you should seriously consider electing S-Corp status? I operated as a disregarded entity for 3 years and was paying wayyyy too much in self-employment taxes. When I switched to S-Corp, I started paying myself a reasonable salary and taking the rest as distributions, which aren't subject to SE tax. Saved almost $6,500 in taxes last year alone!

This is exactly the kind of confusion I had when I started my LLC! The good news is that you're overthinking this - the IRS has pretty clear default rules that work in your favor. Since you have a single-member LLC and never filed any election forms, you automatically have what's called "disregarded entity" status. This means for tax purposes, your LLC doesn't exist as a separate entity - all income and expenses flow directly through to your personal tax return via Schedule C. No Form 8832 needed unless you want to change this default classification. Most small business owners stick with disregarded entity status because it's simpler and avoids the complexity of corporate tax filings. Just make sure you're keeping good records of all business income and expenses throughout the year, and don't forget about self-employment taxes on your profits (Schedule SE). The IRS treats your LLC income as self-employment income, so you'll owe both income tax and SE tax on your net profit. You're definitely on the right track - just report everything on your personal return and you'll be fine!

I went through something very similar when I found $85k cash in my late father's workshop about two years ago. Here's what I learned from the process: First, don't panic about the CTR (Currency Transaction Report) - it's just paperwork the bank files for any cash transaction over $10k. It's not an investigation, just documentation. The key is being completely transparent about the source. What really helped me was gathering as much documentation as possible BEFORE going to the bank. I collected: - Old photos of my dad's business - Statements from family members who knew about his cash-saving habits - Any old business records or tax returns I could find - A timeline of when he likely accumulated the cash The bank was actually very understanding once I explained the situation clearly. They asked some standard questions about the source, I provided my documentation, and the deposit went smoothly. No red flags or additional scrutiny. One important thing: make sure you're clear on whether your grandfather's estate went through probate. If it did and this money wasn't included, you might need to work with an estate attorney to handle it properly before depositing. In my case, my dad's estate was still open, so we were able to add this as an asset. The good news is that inherited cash isn't taxable income to you at the federal level, though your state might have inheritance taxes depending on where you live. Feel free to ask if you have other questions - happy to share more details about my experience!

I'm dealing with a similar situation right now - found about $60k cash in my grandmother's house after she passed last month. Reading through all these responses has been really helpful, especially the advice about getting the estate documentation sorted first. One thing I wanted to add from my research so far: if you're worried about the bank asking difficult questions, it might help to call ahead and speak with a branch manager before bringing in the cash. I did this and they were able to walk me through exactly what documentation they'd need and what the process would look like. They even scheduled a private appointment so I wouldn't have to wait in line with a bag of cash. Also, regarding the Colombian business angle - you might want to check if your grandfather filed any FBAR (Foreign Bank Account Report) forms with the IRS back then. Even if he didn't have foreign accounts when he passed, those old filings could help establish the legitimate source of his savings from the business sale. The IRS keeps those records going back decades. The estate attorney consultation really seems like the right first step though. Better to spend a few hundred on legal advice upfront than deal with complications later.

Does anyone know how the mortgage interest deduction works in this situation? If I own 3 properties (my primary home, a vacation home, and my mom's rental that's below market), can I still deduct the mortgage interest on all of them? Tryin to figure out if I'm hitting some kinda limit.

One thing I haven't seen mentioned yet is the importance of keeping detailed records of all your expenses related to the property. Since you're renting at below market rate, the IRS may scrutinize your deductions more closely if you're ever audited. Make sure to track everything - property taxes, mortgage payments, insurance, maintenance, repairs, even mileage when you drive over to check on the property. If the IRS does limit your deductions proportionally (like others mentioned with the 75-80% rule), you'll want solid documentation to support every expense you're claiming. Also, consider getting a formal appraisal or at least documenting comparable rentals in your area when you set the rent. This creates a paper trail showing you made a good faith effort to determine fair market value, which helps justify your rental amount if questioned later. I learned this the hard way when my accountant couldn't find enough documentation to support my below-market family rental and I had to scramble to recreate everything during tax season.

Kevin, regarding the Section 481(a) adjustment that Carmella mentioned - this is actually crucial for your conversion and often overlooked. The adjustment captures items that would be duplicated or omitted due to the accounting method change. Common timing differences include: 1) Accounts receivable at conversion date (income recorded under accrual but not yet received) 2) Accounts payable (expenses recorded under accrual but not yet paid) 3) Prepaid expenses that were deducted under accrual but payment spans multiple years 4) Accrued expenses like utilities or professional services For a consulting S-Corp, you'll likely have a positive adjustment (meaning you'll spread additional income over 4 years) due to outstanding receivables. The calculation involves comparing your books at year-end under both methods. As for California, they generally conform to federal accounting method rules but require their own Form 3115 equivalent (FTB 3115) to be filed. California also has a stricter interpretation of the business purpose test for educational expenses. For the MBA determination letter, that process typically takes 6+ months, so you won't get clarity before year-end. However, you could file a protective election and document your business purpose thoroughly. If questioned later, you'd have contemporaneous evidence of your reasoning. I'd strongly recommend getting a CPA involved for the Section 481(a) calculation - the math can get complex and mistakes are costly.

I went through this exact conversion for my single-member S-Corp consulting business last year and wanted to share some lessons learned that might help you avoid the pitfalls I encountered. First, regarding your owner investment transactions - you're on the right track, but be careful about the computer hardware classification. Under cash basis, if the computer cost more than $2,500, you might need to capitalize it rather than expense it immediately, even though you paid cash. The IRS has specific rules about tangible property that apply regardless of your accounting method. For payroll, I found that Wave actually handles cash basis payroll pretty well once you adjust the settings. You're correct that you'd record everything when cash flows out, but make sure you're still tracking your employer tax liabilities properly since those have specific payment deadlines that don't always align with payroll dates. The MBA tuition situation is where I'd be most cautious. I tried a similar prepayment strategy and ended up having to amend my return after my CPA pointed out that the IRS often views large educational prepayments by single-member S-Corps as constructive dividends, especially when the education could qualify the owner for work outside their current business scope. The safe harbor rules are stricter than many people realize. One thing nobody mentioned yet - consider the impact on your Qualified Business Income (QBI) deduction under Section 199A. Converting to cash basis and making large prepayments can significantly affect your QBI calculation, potentially reducing the 20% deduction benefit. Have you considered spreading the conversion over two tax years to minimize the Section 481(a) adjustment impact?

One thing nobody's mentioned yet - market timing. If you think we're headed for a correction soon, selling some winners now might make sense regardless of the tax implications. I sold half my tech stock gains in early 2022 and was glad I did when everything crashed later that year.

Just wanted to add another perspective on your situation. With $10k in realized losses and $40k in unrealized gains split between short-term and long-term, you have some good flexibility here. One strategy to consider is "laddering" your gain realization over multiple tax years if you don't need the cash immediately. Instead of realizing all $10k in gains this year to offset your losses, you could realize maybe $7k this year (prioritizing short-term gains as others mentioned) and carry forward the remaining $3k in losses to offset future gains or deduct against ordinary income next year. This approach can be particularly beneficial if you expect to be in a higher tax bracket next year or if you anticipate having more capital gains in the future. The $3k annual deduction against ordinary income can provide nice tax savings year after year if you don't have enough gains to offset it. Also worth noting - if you do decide to sell and immediately repurchase (which is fine for gains), just make sure you're not creating any unintended wash sale issues with related securities or funds that might track the same underlying assets.