The Truth About Bonus Depreciation And 1031 Exchanges

Today on Tax Tuesday, Anderson Advisors Barley Bowler, CPA, and Eliot Thomas, Esq., tackle important tax questions involving capital gains, opportunity zones, 1031 exchanges, bonus depreciation, and business tax planning. They discuss whether living in an opportunity zone can help investors avoid capital gains taxes on stock sales and explain how 1031 build-to-suit exchanges may qualify for bonus depreciation. You'll hear strategies for selling land and reinvesting in real estate while deferring taxes, along with important considerations for business owners planning multimillion-dollar sales in high-tax states like California. Barley and Eliot also break down how to calculate home office deductions without a mortgage, required minimum distributions (RMDs) for minors who inherit IRAs, and whether business expenses incurred before forming an LLC or C corporation may be deductible. They also explain how converting property held in a disregarded LLC into a rental affects its tax treatment and what property owners should understand about IRS reporting requirements. Tune in to discover tax planning strategies that could help you minimize your tax burden, protect your investments, and make smarter financial decisions!

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Highlights/Topics:

8:28 "I have some stock that I am selling with a gain. I heard you can live in an opportunity zone as a tax-free resident. Would I have to sell my house to avoid paying tax or can I rent an apartment in the opportunity zone?" - Simply living in an opportunity zone does not eliminate capital gains taxes. Learn how qualified opportunity zone investments work and what requirements must be met to receive tax benefits.

17:16 "I recently sold an investment property, and I’m currently completing a 1031 build-to-suit exchange. When completed, will the property qualify for bonus depreciation?" - Explore how bonus depreciation applies to 1031 exchanges, the role of cost segregation, and which portions of a replacement property may qualify for additional deductions.

23:47 "I need to know how to sell land and buy a condo with the proceeds without the tax burden upfront. I want to delay the tax burden or eliminate it." - A 1031 exchange may allow investors to defer capital gains taxes when exchanging qualifying investment real estate for another investment property, provided IRS requirements are satisfied.

29:12 "I plan on selling my business in 2027. I live in California, and the anticipated payout will be between $3 million and $4 million. What is the best tax structure to have in place before the sale? Do I need to relocate out of California?" - Business sale planning, entity structure, and state residency can significantly affect taxes. Understand why planning before a sale is essential and how California's tax rules may impact your proceeds.

39:07 "If you use a home office, how do you calculate the deduction when there is no mortgage payment to consider?" - Home office deductions can still be available without a mortgage. Learn how qualifying expenses, square footage, and deduction methods affect the amount you may claim.

43:26 "In 2025, my granddaughter became a beneficiary of an inherited IRA. She is subject to RMDs. How do I calculate the required distributions, and do her parents have to include them on their tax return?" - Inherited IRA distribution rules depend on the beneficiary's circumstances and the applicable IRS requirements. Learn how account balances, beneficiary age, and taxation of a minor's inherited IRA distributions are addressed.

46:58 "I'm in the process of setting up an LLC and C-Corp for trading. How far back can I look for expenses related to the business to write off? Can I deduct training completed before the business was formed?" - Discover how startup expenses, business formation dates, and educational costs affect potential deductions when establishing a trading business.

54:44 "If I buy prop