Short transcript excerpt from a YouTube video discussing real estate tax strategies: how depreciation recapture creates taxable gain on sale, how 1031 exchanges can defer both gains and depreciation recapture, and the estate-planning strategy referred to as “swap till you drop” where repeating exchanges defers taxes until heirs inherit properties with a stepped-up basis.
Or let's say you buy a building, right? You buy a, say, a $500,000 property, maybe it's just a rental home and you hold it for a long period of time. But the government says, hey, you, you took this loss, now we got to add that back essentially as a gain on the backside. Am I saying that right?
Yep, sounds about right.
Yeah. So then, you know, the challenge is you're like, well, wait, now if I sell this property, I'm going to have to pay all this depreciation. Maybe I did a 1031 prior, which I've done on buildings. It's like it can be a massive, you know, jump up in your, in your basis. So, yeah, you can defer your gain, but you can also defer that recapture as well. And people like to say swap till you drop, which is if you continue to do this over a long enough period of time, your heirs receive these properties at a stepped up basis and then that all goes away, right?
You can just defer taxes until the end of your life and basically all those taxes all along the way disappear. Really great for estate planning as well.
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