TAX PLANNING · REAL ESTATE

Tax planning for real estate investors — depreciation, §1031, and REP status done right.

For individual investors, families, and operating principals. Cost segregation. §1031 exchanges. Real Estate Professional election. Passive activity coordination. Beverly Hills CPA firm.

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What we do

Real estate is one of the few asset classes with a full menu of tax tools available to a diligent owner. Used well, they produce meaningful tax deferral over decades. Used poorly — or ignored — they leave real money on the table.

We handle the tools:

- Depreciation — 27.5-year residential, 39-year commercial, and — most powerfully — cost segregation studies that reclassify components of a building into 5-, 7-, and 15-year property for accelerated depreciation. Under §168(k) bonus depreciation (currently 40% for 2025, phasing further before restoration under later legislation) and §179 expensing, the front-loaded deduction can be substantial. - §1031 like-kind exchanges — deferred gain recognition on the exchange of real property for real property held for investment or business use. Post-TCJA, §1031 applies only to real property. Timing is strict: 45 days to identify replacement property, 180 days to close. - Real Estate Professional (REP) status under §469(c)(7) — an election that permits rental losses to be deducted against non-passive income if the taxpayer materially participates and meets the 750-hour / more-than-half-of-personal-services tests. Time logs matter. Documentation matters. - Passive activity rules under §469 — the general treatment of rental income as passive, the $25K special allowance for active participation, and grouping elections. - §199A qualified business income deduction for real estate rental activities that rise to a trade or business (per Revenue Procedure 2019-38 safe harbor and case law). - California conformity gaps — California does not conform to bonus depreciation in the same way; separate California basis tracking is required.

Every strategy is quantified before it is recommended. Every deduction survives substantiation. Boring, complete, and easy to check.

Who this is for

Individual investors with 1-20 rental properties.
Real estate operating families with commercial holdings, LLCs, and partnerships.
Syndicators and general partners in real estate partnerships with LP investors and K-1 reporting.
Developers with active-development income and mixed-use holdings.
HNW individuals using real estate as a tax-managed component of their broader portfolio.

Deliverables

Cost segregation coordination — engagement of qualified cost-seg engineers, review of study output, and integration into depreciation schedules.
§1031 exchange planning — 45-day / 180-day timing, qualified intermediary coordination, boot analysis, replacement-property identification support.
REP status evaluation — hours-based analysis, time-log support, and the material-participation tests under §469.
Passive activity coordination — grouping elections, PAL suspension tracking, and disposition planning to release suspended losses.
Federal and California return preparation — tracking California basis differences on assets subject to differing depreciation.
Partnership K-1 coordination — for GP/LP structures and family partnerships.

Frequently asked

Q: What is a cost segregation study and when is it worth doing?

A: A cost segregation study is an engineering-based analysis that reclassifies components of a building into shorter depreciable lives (5-, 7-, or 15-year property) rather than 27.5- or 39-year real property. Combined with §168(k) bonus depreciation, this accelerates deductions substantially. Generally worthwhile for properties with basis above ~$500K, held for at least 3-5 years, and where the owner has enough income to absorb the accelerated deduction.

Q: How does a §1031 exchange work?

A: You sell investment or business real property and reinvest the proceeds in like-kind real property, deferring gain recognition. You have 45 days from sale to identify replacement property (up to three properties or under specific value-based rules) and 180 days from sale to close on the replacement. A qualified intermediary must hold the funds — you cannot touch the cash. Boot (non-like-kind property received) is taxable to the extent received.

Q: What is Real Estate Professional status, and do I qualify?

A: REP status under §469(c)(7) is an election that removes the passive-activity classification from your rental activities, permitting rental losses to offset non-passive income. To qualify, you must (a) spend more than 750 hours on real estate activities and (b) more than half of all your personal-service hours on real estate. Married couples elect at the individual level. Time logs are essential — the IRS examines this election closely.

Q: How is California different from federal on real estate depreciation?

A: California does not conform to §168(k) bonus depreciation the way federal does; it also has different §179 limits. This creates separate California basis on assets, tracked over the holding period and reconciled at disposition. We maintain separate California depreciation schedules — because if we do not, the basis at sale will be wrong.

Q: Can rental real estate qualify for the §199A deduction?

A: Yes, if the activity rises to a trade or business. Revenue Procedure 2019-38 provides a safe harbor (250+ hours per rental real estate enterprise, separate books, contemporaneous time records). Not every rental portfolio qualifies. For those that do, the §199A deduction is worth 20% of qualified income against ordinary rates.

Q: How do you fit into a syndicator or GP structure?

A: We work at the entity level (partnership return, K-1 preparation) and at the principal level (individual return, coordination with the entity K-1). Family partnerships and syndications with outside LPs are both regular engagements.

Depreciation. §1031. REP status. California basis. All of it, done right.

Tax planning for real estate investors — Beverly Hills-based, partner-led, MBA-holding CPAs. Thirty-minute consultation.