Real Estate Operator: Cost Seg + 1031 Stack

The situation

The investor was selling a Sacramento commercial property at a $187K gain (recapture + capital) and acquiring a $2.8M mixed-use property in Texas. Their prior CPA filed the returns but didn't proactively coordinate 1031 timing, cost segregation, or the §469(c)(7) real-estate professional status that would allow accelerated deductions to offset other income.

What we did

We coordinated the 1031 exchange with the Qualified Intermediary to hit the 45-day and 180-day windows, commissioned a cost segregation study on the replacement property, and documented the investor's real-estate professional status (over 750 hours, more time in real-estate trades than any other activity). We applied 2025 bonus depreciation (40% at the time) to the accelerated 5- and 15-year property identified in the cost seg study.

• 1031 exchange coordination with Qualified Intermediary
• Cost segregation study coordination
• Bonus depreciation planning
• Passive activity loss analysis
• Real-estate professional status documentation

The outcome

$187K of capital gains and depreciation recapture deferred into the new property's basis. $340K of accelerated depreciation taken in Year 1, fully deductible against other income thanks to real-estate professional status. Combined tax savings in Year 1: approximately $145K vs. baseline.