Depreciation, exchanges, and passive loss rules used deliberately.
Real estate is one of the few areas where the tax code rewards planning done in advance and punishes planning done late. We work on acquisition structure, depreciation strategy, and exit timing before the closing statement is signed — because after it is, most of the options are gone.
From the close of the relinquished property; the deadline is statutory and not extendable.
Or the due date of the return including extensions, whichever comes first.
Annual hours in real property trades or businesses, and more than half of all personal services.
Where real estate & property investors lose money on accounting.
Passive loss rules trap depreciation
Rental losses are generally passive and suspended against ordinary income unless the taxpayer qualifies as a real estate professional or meets a short-term rental exception. Generating paper losses without a way to use them defers the benefit indefinitely.
Cost segregation timing
A study reclassifies parts of a building into five, seven, and fifteen-year property, accelerating deductions into the earliest years. Its value depends on holding period, bonus depreciation available in the placed-in-service year, and the owner's bracket — and on recapture at sale.
1031 exchanges fail on deadlines, not intent
Forty-five days to identify and one hundred eighty days to close are unforgiving, and the qualified intermediary must be engaged before the relinquished property closes. Touching the proceeds ends the exchange.
Entity structure across a growing portfolio
Holding properties across LLCs affects liability, financing, California's minimum franchise tax and LLC fee, and the ability to group activities for the material participation tests. The structure that suits two properties rarely suits ten.
What a real estate & property investors engagement includes.
- Acquisition structuring and purchase price allocation
- Cost segregation coordination and depreciation modeling
- 1031 exchange planning, timeline management, and reporting
- Real estate professional status and grouping election analysis
- Short-term rental material participation planning
- Multi-entity bookkeeping with per-property profit and loss
- California LLC fee, franchise tax, and multi-state filing management
Real Estate & Property Investors: direct answers.
What is a cost segregation study and when is it worth doing?
It is an engineering-based analysis that reclassifies portions of a building — fixtures, finishes, land improvements — into shorter depreciable lives, accelerating deductions into the early years of ownership. It is generally worth doing on properties above a few hundred thousand dollars in improvement value when the owner is in a high bracket and expects to hold the property long enough that recapture at sale does not erase the benefit.
Who qualifies as a real estate professional for tax purposes?
A taxpayer who spends more than 750 hours during the year in real property trades or businesses in which they materially participate, and more than half of all personal services performed that year in those activities. Meeting the test can convert otherwise suspended passive rental losses into losses usable against ordinary income, so contemporaneous time records matter.
What are the deadlines in a 1031 exchange?
Replacement property must be identified in writing within 45 days of closing the relinquished property, and the exchange must be completed within 180 days or by the return due date including extensions, whichever is earlier. A qualified intermediary must hold the proceeds — if the seller receives the funds, the exchange fails.
Should each rental property be in its own LLC?
It depends on liability tolerance, lender requirements, and cost. In California each LLC carries an $800 minimum franchise tax plus a gross-receipts-based fee, so separating a portfolio into many entities creates real annual cost that must be weighed against the liability separation and financing flexibility it provides.
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Schedule a complimentary consultation with Selim Hanna, CPA, and see how strategic advisory can protect and grow your business.