Thanks for sharing your experience! So with your holding LLC structure, do you just file one partnership return for the holding LLC, or do you still need to file for each property LLC as well? I'm trying to understand the administrative burden.

With my structure, I only file one partnership return (Form 1065) for the holding LLC. The individual property LLCs are treated as "disregarded entities" for federal tax purposes since they're single-member LLCs owned by the holding LLC. This significantly reduces tax preparation costs and paperwork. You'll still need to maintain separate books for each property for good management practices, but the tax filing burden is much lighter. Note that state requirements vary - some states may require separate filings or have annual fees for each LLC regardless of tax status. In my case, the administrative simplification at the federal level has been a big advantage.

That's a really important consideration. For real estate investors, the QBI deduction can offer up to a 20% deduction on qualified business income. With pass-through entities (LLCs taxed as partnerships, S Corps, or disregarded entities), you generally preserve your ability to claim this deduction. C Corps aren't eligible for the QBI deduction, which is another reason they're often not ideal for real estate holdings. Also, if your income is above certain thresholds, having your properties in the right structure becomes even more important to maximize QBI benefits.

Thanks for that strategy idea! How do you determine what the right split is between using 529 funds versus other money? Do you need to keep really detailed records to show which expenses were paid from which source?

The ideal split depends on maximizing your education credits. For the American Opportunity Credit, you need $4,000 in qualified expenses to get the full $2,500 credit. So I typically recommend paying at least $4,000 of tuition/fees from non-529 sources, then using 529 funds for remaining tuition and all room/board expenses. Yes, good record-keeping is essential! Keep copies of all tuition statements, receipts for books/supplies, and documentation showing which payment method was used for each expense. I create a simple spreadsheet each semester showing expense type, amount, date paid, and payment source. This has been extremely helpful during tax season and would be crucial documentation if ever audited.

Is there a specific form you need to file to elect to treat the 529 distribution as taxable? Or do you just report it differently on your regular tax forms?

Thank you for these clear steps! Quick question - if my shares were sold at slightly different prices throughout the day (not all exactly at the FMV at exercise), does that change how I should calculate the adjustment?

No problem! If your shares were sold at slightly different prices throughout the day, that doesn't change how you calculate the basis adjustment. The adjustment is still (FMV at exercise - original option price) × number of shares sold. The selling prices will determine if you have any additional short-term capital gain or loss after the adjustment. For example, if FMV at exercise was $106.63, but some shares sold for $106.80 and others for $106.40, you'd have a small gain on some and small loss on others. But the basis adjustment calculation is the same regardless of the actual sale prices.

Yes, you'll absolutely need to make the same type of adjustment when you eventually sell. The key is that when you exercised the options, you already paid ordinary income tax on the spread between your grant price and the FMV on exercise date. That spread was included in your W-2 income for the year you exercised. Your new cost basis becomes the FMV on the date you exercised, not the original grant price. When your broker issues a 1099-B after you sell, they'll likely show the original grant price as your basis, so you'll need to make that same Form 8949 adjustment to avoid being taxed twice on the same income. Keep good records of your exercise date and the FMV on that date!

This is super helpful, especially the Google Scholar tip! I hadn't thought of using that for tax research. Do you find the search results are accurate or do you get a lot of unrelated cases to sort through?

Google Scholar works surprisingly well if you use specific terms. For instance, instead of searching "business expenses tax court," try "ordinary and necessary 162(a) tax court" to get more relevant results. You'll still get some unrelated cases, but far fewer than a general search. I usually add the specific code section in my search along with any technical tax terms. If you're looking for cases on a particular issue, adding terms like "held that" or "we conclude" can help find cases where the court actually made a ruling on your issue rather than just mentioning it in passing.

Westlaw and LexisNexis are industry standards for a reason - they have excellent search capabilities and organizing features. But they're prohibitively expensive for most individuals unless you have access through work or school.

Thanks for the input. I'll check if any local law libraries offer public access terminals. Might be worth the drive to use those resources occasionally for complex research.

Thank you for this practical advice. I've been saving receipts but I hadn't thought about organizing them by category or keeping screenshots of the campaign itself. Did your dad's accountant recommend any specific way to document that the expenses were paid specifically from the crowdfunding money versus regular income? Should I have set up a separate bank account just for these funds?

My dad actually didn't set up a separate account, and his accountant said that was his biggest mistake. She strongly recommended having a dedicated account for crowdfunding money to create a clear paper trail. It doesn't have to be anything fancy - even just a free checking account where you deposit all the crowdfunding money. That way, if you're ever audited, you can clearly show the money coming in from crowdfunding and then going out for qualified expenses. Without that separation, it gets really muddy trying to prove which dollars went to which expenses. If possible, I'd recommend transferring the funds to a separate account now and using that for all remaining expenses.

I wasn't audited for crowdfunding specifically, but I did get flagged for an audit the same year I received about $35k from a GiveForward campaign (similar to GoFundMe) for my son's medical treatment. When I showed the IRS agent my documentation proving it was a medical crowdfunding campaign, they immediately marked that portion as non-taxable and moved on to examining my other income. They didn't question it at all once they saw what it was.