All Forum Posts by: Will Dixon

@Andrew Wicklow

This is false. Pass through entities, like the name suggests, pass the income through to the members. There is no reduction of taxes or recharacterization of income. Be careful with the information you are spreading.

@Angela Zaitz

Most tax brackets are marginal so you shouldn’t be too worried about crossing into a new one.

@Jonathan Schwartz

Although your examples include multiple taxes they are not the same as what is commonly referred to as “double taxation”. That is a reference to corporate income taxes and dividend rates. When a C-corporation earns income they pay a 21% tax on it at the federal level. When the corporation pays the earnings out to their shareholders as a dividend it is taxed again (20% top rate). Ironically, when you are in the top tax brackets, that dollar of corporate earnings gets another 3.8% net investment income tax at the shareholder level. So it is in fact triple taxed, all of which being income taxes paid to the federal government.

I do agree with your statement regarding the 1031 though. It’s not some kind of god given right that real estate has. However, I think using it as as the scapegoat for fixing income inequality is foolish. It will reduces the incomes of various parties in the transaction cycle and/or the wealthy will find workarounds for it. Might as well just leave 1031s intact and add an incremental 3-5% tax on the gain that would have been realized.

@Joe Villeneuve

So you sell when principal pay down equals your down payment? What about equity from appreciation? And why choose to sell rather than refinance at that point? If you were only measuring on principal pay down I guess you’re guaranteed to hold for about 7-8 years before you sell. I like the idea of redeploying the equity so your greater portfolio value can grow, but the act of selling seems a bit arbitrary when a refi would accomplish the same outcome.

@Patrick Britton

What???

@Greg M.

Haha his math is laughable. He says he puts even less down. Say 10% down ok 90k equity 810k loan. Now it goes to 1.08M. Now he’s got 270k equity and a 810k loan. Somehow he can’t get ahead on the extra 180k of equity he got because his lender is eating up all of that in fees...

@John Farady You do know that lower money in the deal AMPLIFIES your return from appreciation (or cash flow for that matter). Just thought you should be aware. Also I’m not sure if you are reading any of the graphs other than maybe a location in the heading and the slope of the line, but that very first table you posted is a good argument for why CA real estate is so impressive. I’m on mobile and wasn’t able to see the whole graph but the Y-Axis is percent change from prior year. See how the peaks are at 30% and the line spends a significant amount of time between 20% and 30%? That is year after year after year of 20-30% appreciation. Yes it drops negative periodically. You may lose 10% in a bad crash. But you make up for it when you’re in the upper part of the graph. Can you find a graph showing the same for Phoenix? I would love to compare the two.

@Dan DiFilippo

How can you be so smug? Everyone else has been capable of divorcing their comments from politics? You open with “I don’t like Biden. Trump is one of the best presidents in our history.” Pot calling the kettle black...

Onto the matter at hand...The 1031 exchange is without a doubt a wealth preservation tool. Combined with basis step ups it can effectively carry generations of wealth in real estate families without paying any taxes. I strongly oppose getting rid of it altogether, but I agree with @Anish Tolia that tax revenue needs to come from somewhere. Rather than abolishing the 1031 exchange I think a small 1031 exchange tax could potentially help generate some revenues while also not completely stagnating market transactions. Something in the ballpark of the Net Investment Income Tax of 3.8%.

@TJ Moreno

I just locked on Tuesday. In California on a 3 unit investment property. 30 year fixed, 3.375% @ 2.375 points

@Joe Splitrock

“I do not want to rent to them because they are a group of 3...I only want 2 people in that condo” were OPs words.

We can go in circles on this, but at the end of the day we are in agreement that it would be ill advised to deny based on the legal environment of SF. You did a better job of addressing OPs question of where in the law does it outline that as discrimination. As far as any of us can tell, it is not explicitly stated. There is a type of discrimination known as arbitrary discrimination which I think could apply under these circumstances.

@Anthony Wick

If there is no discrimination at play, I think the ultimate test would be to deny the applicants and provide the reasoning that they are 3 unrelated persons. No reason to hide behind “screening criteria” since this is an above the board move.

@Rob Malda

That’s false. Look up arbitrary discrimination. Basically the catch all for protected classes.