Level 10

1031 how good of a deal.

Forum|Forum|2 years ago
October 27, 2023
2 replies
19 views

Advantage is deferring the gain and income taxes. A disadvantage is paying costs (prep costs, cost seg studies, exchange costs, attorneys sometimes, your time) each time a 1031 is done. So, I'm wondering if the deferral if the tax savings is worth it after years of accumulated expenses.

My client deferred a gain from 2 real properties into 19 DSTs. This is time suck for me but will be a huge cost for the client.

Tax Talk

sjrcpa

Level 15

It all depends on the numbers.

For a 6 figure gain, or more, with intention to hold replacement property long-term I'd say it's worth it.

The more I know the more I don’t know.

S

strongsilenceAuthor

Level 10

Agree.

A replacement of 19 DSTs means the costs reduce the benefit. I need to ask why he needed 19.

BobKamman

Level 15

Hedging in a risky market? Planned withdrawal, sell one every year until 2042? But the best way to make money with DSTs is usually in marketing the package, not buying it from the promoter.

BobKamman

Level 15

Does the owner of a McDonald's franchise complain "this is time suck for me" when he sees ten cars lined up at the drive-through to buy hamburgers? If you want to complain about work, maybe you're not getting paid enough for doing it. Talk to your boss. That's who gets to send the bills.

But yes, people will pay a lot of costs and fees sometimes to defer or avoid paying a little tax. Section 1031 has been around since the days of much-higher rates on capital gains. (Depreciation recapture, though, might have been less back then.) Each situation should be analyzed based on its own circumstances. Smart clients will ask us to help with that, before making a decision. But we all have our share of dumb clients.

S

strongsilenceAuthor

Level 10

Insightful.

"Smart clients will ask us to help with that, before making a decision". I'm sure he knows more than I do as he has been doing this for decades. So, in effect, I'm learning on his dime.

He intends to hold it and pass it to a daughter (without business acumen) via inheritance. So the FMV step up is a factor and will be another tax benefit.

If you want to complain about work

I'm my own boss and I talk to myself all the time. He he. He will pay me double my bill (he said) as he was extremely late getting me his stuff so I'm not complaining.

"Each situation should be analyzed based on its own circumstances,"

I'd like to move into an advisory role on 1031s and once I get the knowledge, I'll be looking for opportunites.

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