As you likely remember, the Section 1031 exchange allows you to sell a piece of appreciated real estate and defer all the taxes as long as you invest the entire proceeds in like-kind property.
And then consider this: a cost segregation study allows you to separate qualifying real estate into components with shorter depreciable lives that speed up deductions and, in many cases, create immediate write-offs.
Can you (a) defer a large gain via Section 1031 and (b) immediately create a large write-off on the new asset with a cost segregation study?
You can.
But if you will use cost segregation on the newly acquired Section 1031 asset, you may want to make the IRS Reg. Section 1.168(i)-6(c)(5)(iv) election because that applies cost segregation to the entire basis.
If you are thinking of combining the Section 1031 exchange with a cost segregation study and would like my input, please call Rick or I to book some time to discuss at 281-288-0909.
Sincerely,
Dr. Jake Latimer / Partner