A strategy dubbed the "poor man's 1031 exchange" allows real estate investors to defer capital gains taxes by purchasing a new property in the same calendar year as a sale and utilizing accelerated depreciation and cost segregation studies. This method can offset significant gains by deducting components of the new asset over shorter periods, offering a temporary tax advantage. Investors should note that this is primarily tax deferral, as depreciation is recaptured upon sale, and passive activity rules can affect the usability of deductions.
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Ali NematiWritten by Ali
