What’s frustrating for many real estate investors around income tax time, is the gnawing little voice constantly asking whether or not their income tax returns are correctly done. I’m here to tell ya that ain’t the biggest issue when it comes to tax returns. Sorry to do this to ya, but in my experience, investors are an accurate bunch. Their goal in life isn’t to turn their tax returns into giant red flags, attracting the nearest auditor. Besides, most of the math is fairly simple, even if the return’s instructions aren’t. 
The real potential issue.
BawldGuy Axiom: In this age of uber-accessible information, finding answers to our questions is, generally speaking, not a major problem. What bites us where we sit are the answers to those questions we never knew to ask. Answers to unasked questions can be deadly.
One of the many ways you can look at your tax return is as a summary of the investment strategy(s) you’ve chosen to execute — purposefully or not. The question beggin’ to be asked is, [Read more...]
Section 1031 of the Internal Revenue Code is one of the few tax deferral strategies available for real estate investors. It is basically an “avoid tax on the sale” provision for real estate. It should go without saying that in order for this provision to apply, the sales proceeds are reinvested in similar or like kind property. However, reinvestment in like kind property is just part of the qualification for an exchange. For investors who utilize entities for their property, the knowledge of this has come at inopportune times. The use of land trusts, limited liability companies, corporations, or other entities may nullify an exchange if you do not have a complete grasp of the requirements under 1031.
As my clients approach the April 15 filing deadline questions are raised as they look at their existing planning after conversing with their CPA. Invariably, a few will ask themselves if tweaks should be implemented for the upcoming year. My answer is always the same; you could, but at what cost? I am not referring to money, although some changes will definitely cost you, but the cost from a practical investing standpoint. As an active real estate investor who is currently in the process of closing on three properties in Texas, I am reminded that although asset protection is very important, so is practicality. 
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