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Financial advisory
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importantly, one’s heirs can start depreciating the new value of the property. This is very important – it means that even fully-depreciated real estate can yield substantial tax benefits to one’s heirs.
BUT YOUR INVESTOR IS STILL ALIVE – HOW DOES THIS BENEFIT HIM?
If you are in a community property state like us in California, this stepped up basis applies to an entire estate after the death of one spouse. When my client’s wife passed away, he can tell the IRS that the new value of this property is as of the date of her death. When the asset sells, his taxes due will be negligible – the result of only “a few months” of ownership. He intends to buy another investment property with the proceeds to continue his income and growth potential. When he does this, he will be able to begin taking a depreciation deduction based on the full purchase price of his new property. This investor enjoyed a substantial gain on his principal, so his income and growth potential will be based on a larger investment. He could also enjoy much larger depreciation deductions as well.
“In the case of real estate, the stepped up basis applies to depreciation as well.”
THE RESULTS
By following this plan, my investor can take advantage of the stepped up basis to eliminate all the taxes on capital gains and accumulated depreciation that he accumulated throughout his lifetime. At the same time, we can create a new depreciable basis for him as well. Since the IRS will treat this investment as a “new cash purchase,” (which it is), my client can begin taking depreciation deductions based on the full purchase price of the property that is attributable to improvements. My estimations show that his depreciation deductions can now defer taxes on 123% of the income from his new purchase. This means that tax on all his income from this property will be deferred, and that extra 23% can go towards tax savings on his other properties.
In this instance, I was able to use my knowledge of real estate tax law to create substantial tax benefits for my client. This is how I try to help all of my investors. If you have any questions, my office number is (877) 313-1868.
Securities offered through Emerson Equity LLC, member FINRA/SIPC. Emerson Equity LLC and Specialized Wealth Management are not affiliated. All investing involves risk. Always discuss potential investments with your tax and/or investment professional prior to investing. Hypothetical scenarios herein are provided to illustrate mathematical principals only, and they are not a promise of performance. There can be no assurance that any investment strategy will achieve its objectives.
WANT A REPLACEMENT PROPERTY WITHOUT ACTIVE MANAGEMENT?
Recent offerings, located nationwide, have included:
• Office • Apartments • Triple Net • Retail • Energy Royalties
I have completed over four hundred 1031 exchanges for investors. $200,000+ equity required.
Learn more about our investment programs at www.ChrisMiller1031.com
Contact Chris Miller, MBA for a free consultation
877-313-1868
Chris@SpecializedWealth.com 2522 Chambers Rd., Suite 100 Tustin, CA 92780
Investing in real estate, with or without use of a 1031 exchange, carries the risk of losing your principal, income or tax benefits. Additionally, the IRS has issued inflexible guidelines for completing tax-deferred 1031 exchanges. Failure to follow these guidelines could lead to a loss of tax benefits. 1031 Exchanges can involve significant fees. This does not constitute an offer to buy or sell any security. Investments may be illiquid in nature and those seeking to dispose of their investments early may be unable to do so. Securities offered through Emerson Equity LLC. Member FINRA/SIPC, MSRB registered. Advisory services offered through Emerson Equity LLC an SEC registered investment advisory. Emerson Equity LLC and Specialized Wealth Management are unaffiliated.
68 AUGUST 2021 - APARTMENT MANAGEMENT MAGAZINE AMM1/6