Question on cash based accounting for RE investments

[Maqsood Alam]

Wanted to clarify this with a wider audience. 

Recently a Real Estate developer approached me and explained the following. Wanted to see how legit this method really is.

1) Open an LLC with Cash based accounting method

2) Invest through the LLC and buy a RE property. Say you spent $100k.

3) Since cash based accounting method, record that as a loss for that year (assuming you didn't sell it that year).

4) Since you incurred $100k loss, then deduct that from your income for that year. If you made through other wages only $100k that year, then you pay $0 tax.

5) Roll the property you purchased into a 1031 exchange and defer the taxes until you want to get out.

Is this something legit and something wealthy people do all the time?