Evaluates real estate tax strategies including 1031 exchanges, opportunity zones, and cost segregation. Use when planning real estate tax, structuring 1031 exchanges, or analyzing cost segregation studies.
Evaluating whether a property disposition qualifies for a Section 1031 like-kind exchange
Assessing Qualified Opportunity Zone (QOZ) investments for capital gains deferral and exclusion
Reviewing a cost segregation study to accelerate depreciation deductions
Comparing hold-vs-sell-vs-exchange scenarios across multiple properties
Analyzing cross-border real estate structures with international tax implications (treaty benefits, FIRPTA withholding, branch profits tax)
Structuring acquisition or disposition to optimize basis allocation, depreciation schedules, and entity-level tax treatment
Inputs To Gather
Property details: Type (commercial, residential, mixed-use), location, acquisition date, purchase price, current fair market value, outstanding debt
Ownership structure: Entity type (LLC, LP, S-corp, REIT, DST), number of owners, allocation provisions
Transaction specifics: Proposed sale price, timeline, identified replacement properties (for 1031), capital gains amount and character (short-term vs. long-term)
Related Skills
Cost segregation data: Engineering study report, asset classifications (5-year, 7-year, 15-year, 27.5/39-year), bonus depreciation elections already taken
Tax position: Owner's marginal tax rate, net investment income tax (NIIT) exposure, passive activity loss carryforwards, prior Section 1231 gains/losses
QOZ specifics (if applicable): Census tract designation, date of original capital gain, investment vehicle structure, substantial improvement plans
International elements (if applicable): Foreign investor residency, treaty country, FIRPTA withholding status, branch vs. subsidiary structure
Workflow
Define scope — Confirm which strategies are under evaluation (1031, QOZ, cost segregation, entity restructuring, or combination). Identify the taxable event and relevant tax years.
Confirm both relinquished and replacement properties are held for investment or productive use in a trade or business [VERIFY: state conformity with federal 1031 rules]
Check 45-day identification and 180-day closing deadlines
Evaluate boot received (cash, debt relief, non-like-kind property) and resulting gain recognition
Assess related-party restrictions under IRC §1031(f)
For reverse exchanges, confirm compliance with Rev. Proc. 2000-37 parking arrangements
Evaluate QOZ investment (if applicable)
Verify the investment is in a designated Qualified Opportunity Zone [VERIFY: current census tract designation status]
Confirm capital gain was invested within 180 days of recognition event
Assess whether the Qualified Opportunity Fund (QOF) meets the 90% asset test
Evaluate substantial improvement requirements for existing buildings (doubling basis within 30 months)
Model deferral benefit (original gain deferred until 2026 or earlier disposition) and exclusion of post-investment appreciation after 10-year hold [VERIFY: current legislative status of QOZ incentives post-2026]
Analyze cost segregation (if applicable)
Review engineering study methodology (detailed engineering approach vs. residual estimation)
Validate asset reclassifications from 27.5/39-year to 5, 7, or 15-year recovery periods
Calculate present value of accelerated depreciation benefit at owner's marginal rate
Assess bonus depreciation applicability under IRC §168(k) [VERIFY: current bonus depreciation phase-down percentage for placed-in-service year]
Flag depreciation recapture exposure (§1245 ordinary income vs. §1250 unrecaptured gain at 25%) upon future disposition
Model tax outcomes — Build side-by-side comparison of scenarios:
Outright sale (federal + state capital gains, NIIT, depreciation recapture)
1031 exchange (deferred gain, adjusted basis in replacement property)
QOZ investment (deferral value, exclusion value at 10-year mark)
Cost segregation impact on annual cash flow and effective tax rate
Combined strategies (e.g., cost segregation on replacement property post-1031)
Address international considerations (if applicable)
FIRPTA withholding obligations (15% of gross proceeds for foreign sellers) [VERIFY: current withholding rate and exemptions]
Treaty-based rate reductions or exemptions
Branch profits tax for foreign corporations
State-level withholding for nonresident sellers
Synthesize findings — Summarize the optimal strategy, quantify tax savings, and flag implementation risks, deadlines, and compliance requirements.
Output
Executive summary: Recommended strategy with estimated tax savings and key trade-offs
Scenario comparison table: Side-by-side tax impact for each strategy analyzed (sale, exchange, QOZ, cost segregation)
Timeline and deadlines: Critical dates (45-day ID period, 180-day closing, QOZ investment window, placed-in-service dates)