All Forum Posts by: Vladimir Kotomin

One more question:

Since I have offers for my two properties from the same buyer, they can be combined into one offer, which would reduce the closing costs. How to separate the deferred gains for Property A vs. Property B, however? Would we need two closing statements, or would indicating on the combined offer which part of how much of the total price is allocated to A and B be sufficient?

Thank you, Ashish.

Follow-up questions using my example: Year 2021 $200k net selling price, $110k original purchasing price, resulting in $90k appr-n gain and $38k accumulated derp-n; 90k+38k = 128k reinvested into an OZF/QOF.

(1) Since I don’t pay the tax on unrecaptured depr-n in 2021 (if I understood correctly), how do I separate the $90k appr-n and the $38k unrecaptured depr-n on Forms 8949 and 8997? Guess I reduce the cost basis to $72k = 110k - 38k depr-n) on For 8949, but 90k and 38k are taxed at different rates.

(2) After 2026, the tax on the gain is due. I read the basis is stepped up 10%. Is “basis” that is stepped up here the total gain invested into an OZF ($128k) or the basis of the original property sold to buy an OZF ($72k)?

(3) If my capital gains rate is 15% and depreciation recapture rate is 25% in 2026, how much do I pay in taxes on that total gain after the end of 2026?

Thanks!

Sorry if this was asked; I searched and didn't find a similar thread.

I know depreciation recapture is not taxed for OZF investments held > 10 years. What about the properties sold to acquire an OZF? If I sell my four-plex for $200k that had cost me $110k and has accumulated depr-n of $38k, the gain due to appreciation is $90k and the unrecaptured depreciation is $38k. If I invest the entire $128k gain (90k + 38k) into an OZF, is the entire $128k deferred to 2026 or is only the $90k appreciation deferred? I asked two different people and got opposite answers.

Also, am I correct that in 1031 exchanges gains arising due to both appreciation and unrecaptured depreciation are always deferred?

I am not looking to someone to sell me a DST. My inbox is full of these messages. I am looking for a DST sponsor that does not employ broker-dealers and sells directly.

(1)-(2) are cyclical (go up and down with the economy); might still consider them and hedge. Didn't know oil & gas partnerships (I guess?) qualified as 1031 exchange properties.

(3) If I do this (buy an investment, convert into primary x years from now, then sell x + n years from now), what taxes would it trigger at the eventual sale? Depreciation recapture? I thought I had read somewhere 1031 exchange properties can't be owner-occupied even partially.

I am looking for such a DST. Can anyone recommend them? Is due diligence a concern when the broker-dealer is not involved?

Hi David,

(1) I don't have much to invest ($280-$350k) and would want to diversify across different properties anyway (some DSTs are diversified, and I can probably pick up three different DSTs with my proceeds);

(2) no direct participation in managing properties (tired of it);

(3) illiquidity is not an issue (looking for a 7-10 or longer horizon, will need some cash 8-20 years down the road to fund the kids' college);

(4) prefer paper investments in general, would be able to hedge declines in the real estate market with financial instruments (have a Ph.D. in finance and a CFA designation, but a newbie to RE exchanges).

I have heard that some DST sponsors do sell directly (and even read in a post here, but can't find it - still new here)...

Hi all, I am Vlad. Looking to sell two properties in Milwaukee (bought in 2010 and 2015) and to do either a 1031 exchange (likely into a DST) or to reinvest the gains into an OZF. Interested in finding DST sponsors that sell directly and thus reduce the front-end load.