Strategy, markets & tax-deferral thinking.
Clear, practical perspective on 1031 exchanges, DSTs, and building durable real estate wealth — written for owners and investors, not specialists.
If it burned down tonight, could you rebuild it? Often the answer is no
Plenty of good income property predates the zoning it sits under. It is allowed to stand, and allowed to keep earning. What it is not always allowed to do is come back.
Reinvest every dollar, the rule says. Then the roof fails in March
Full reinvestment is what keeps an exchange fully deferred. It also means your account is empty by design on the day you take on a building with a twenty-year-old roof.
You underwrote the seller's tax bill. Yours is going to be different
A tax-deferred exchange defers income tax on your gain. It does nothing whatsoever about the property tax bill, which in many places resets to what you just paid.
The rent still arrives on the first. The store has been closed for a year
A credit tenant can stop operating and keep paying, entirely within its rights. The checks do not miss a beat while the value of the building quietly falls away.
The rent roll is the seller's opinion. The estoppel is the tenant's
One is a spreadsheet somebody made about their own building. The other is each tenant signing their version of what they owe and what they were promised. They disagree more often than you would think.
A 5% distribution is not a 5% return, and the difference is your own money
Two DSTs can quote the same number and mean very different things. One pays you from the building. The other pays you partly from the cash you handed over at closing.
Changed your mind on day 31? You can still redo the whole list
Most owners treat the identification they sent on day 12 as carved in stone. It is not. Until midnight on day 45 you can revoke it entirely and start over.
Spreading the gain instead of deferring it: the installment sale
Section 453 spreads a tax you will still pay; Section 1031 defers it. The trap is Section 453(i): ordinary recapture is due in full in year one no matter how little cash you received.
You exchanged into a building your own business rents. The income just changed character.
Rent paid by a business you materially participate in is recharacterized as nonpassive, while losses stay passive. It quietly defeats the plan to absorb suspended losses with your own rent.
The losses on your return that a 1031 exchange does not free
Suspended passive losses are released by a fully taxable disposition, and an exchange is the opposite of that. They carry forward instead, and they can quietly make your boot tax-free.
What do you do with the last $80,000?
Buildings come in the sizes they come in, and your proceeds are a precise number. The gap between them is boot unless you plan for it before you identify.
The Phase I that comes back on day 38
CERCLA liability is strict, joint and several, and runs with ownership. The landowner defenses require all appropriate inquiries before you take title, and the 45-day clock does not care.
When borrowing makes the deal worse: negative leverage under a 45-day clock
Replace the debt or recognize mortgage boot. The rules push exchangers toward borrowing without asking what the borrowing costs, and above a certain rate each dollar reduces your return.
The gain you could not defer: what to do with 1031 boot
Boot is recognized capital gain, and capital gain has more than one exit. A qualified opportunity fund can reach equipment, entity interests, and cash boot that Section 1031 cannot.
Selling the farm: sorting one sale into four different tax outcomes
A farm sale looks like one transaction and is taxed like four. The allocation between house, land, equipment, and grain is negotiated in the contract, not discovered afterward.
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Occasional, substantive notes on tax-deferral strategy and replacement-property trends. No noise.