Here’s How Our Tax Strategy Works:
The Lazy 1031 exchange works by taking advantage of two tax strategies: the 1031 exchange and cost segregation. Here's how it works:
How does this work and why do some CPAs not understand this?
Since most real estate investors are considered Passive investors (IRC 469) meaning they are not real estate professionals, they report their passive activities on Form 8582. Your passives losses accumulate on this form and they are offset by other passive income.
When you dispose of a property that was a “passive activity”, the gain is considered a “passive activity gain”. By statute, this gain MUST net against passive activity losses from ANY property (this is the common misconception).
Gains from passive activity sales net against passive activity losses from ANY source!
There are several benefits to using a Lazy 1031 exchange as a tax strategy:
A Lazy 1031 exchange is a tax strategy that can help real estate investors defer taxes on the sale of their rental properties while generating income from new rental properties. In years of Bonus Depreciation, this strategy provides more flexibility over a Traditional 1031 exchange.
