Those funds spent with the corresponding improvements completed will qualify for tax-deferred exchange treatment and those that aren't will be considered taxable boot.

You also need to look at business registration fees with the State's Secretary of State office as well as local business licenses (states like Alabama assess various fees for their business licenses...and there's a business license for everything it seems like).You can take credit for INCOME TAX paid to another state on your personal return (unless you live in a state that doesn't have an income tax like Florida) but business license fees and gross receipts taxes are generally straight overhead....subject to passive loss limitations (again, depending on how your business is structured) if your in a State like Colorado that mirrors IRS taxable income (unless you qualify for active participation status by the IRS)The best answer is to hire a CPA so they can evaluate your individual situation and plan.

You actually only have a taxable gain of $9,628 ($14,668 + $9,505 - $14,545) we add back the principle amount of your mortgage payment because it is not deductible and subtract out the deprecation we listed above.

I'm looking specifically for a property that has high building value, so that I can claim a lot of bonus depreciation this year and generate a large paper loss in my rental property business this year.My wife is a Real Estate Professional, so we plan to use these losses against our taxable income.Right now I'm looking for something like a 4-plex around 1M Purchase Price, with a building value of 80% or higher.

A gain will likely push you into a position where you gains will be taxable at 15%.All of this will ultimately be subject to the specifics of your financial situation in the year of sale.  

However, the years 2012-2014 are a period of nonqualified use since the home was not principal residence during those years Period of nonqualified use                                                3 years Total ownership period                                                 6 years Total gain ($350,000 − $200,000) $150,000 Nonexcludable gain (3/6 × $150,000) 75,000 You must report a $75,000 gain for non-qualified use.The remaining $75,000 ($150,000 − $75,000) of gain can be excluded under 500k exclusionHowever, since half of the house was rented and your portion was also rented and depreciated, you have to prorate the taxable gain of 75,000 between two units.

I've attached a screenshot of a typical property that we see as real estate investors where the person has $30,000 of gross income but $50 of taxable income....and that's WITHOUT it being cost segregated.

To illustrate the cost differences between cities, I compiled overhead costs for the listed cities.Sources:State income tax rateState average insurance rateState property tax rateTo put this in perspective, below are the annual operating costs for a $400,000 property with a taxable $15,000 annual cash flow.

Whatever profit there is in it for them will be taxable. 

Thanks, David.There's one benefit I can think of--with active business income, one can contribute into solo 401K, that amount can be deducted from business earning, so generating less net profit, hence less taxable income.Or turn this solo 401K into Roth 401K, so all profit generating afterwards are tax free.Maybe at some point, the advantage can exceed the SE taxes.Is there a way to structure it to give us the flexibility?