Real Estate Tax

§1231, §1250 recapture, dealer vs. investor, passive activity, cost segregation.

§1245, §1250 at 25%, bonus recapture, §751 hot assets.

$25K offset, real estate professional election §469(c)(7).

Qualified nonrecourse financing exception for real property.

REPS two-part test: 750 hours + more-than-half personal services in real property T or B with material participation. 11 categories. §1.469-9(g) aggregation election. Material participation 7 tests. Rev. Proc. 2011-34 late aggregation. STR 7-day loophole. §1411 NIIT 500-hour safe harbor. Self-rental trap. Audit defense.

Section 1031 complete mechanics post-TCJA and OBBBA. Real property only since 2018. OBBBA July 4, 2025 PRESERVED §1031 unchanged - rejected proposed $500K caps. 45-day identification, 180-day exchange (or return due date). Q4 trap October 17 onward. Qualified Intermediary Reg §1.1031(k)-1(g)(4) safe harbor. Three-property / 200% / 95% identification rules. Reverse exchange Rev. Proc. 2000-37 with EAT parking. §121 coordination Rev. Proc. 2005-14. Related-party 2-year rule §1031(f). 15% incidental personal property rule Reg §1.1031(a)-3. New §1062 farmland deferral added by OBBBA.

Section 121 complete mechanics. $250,000 single / $500,000 MFJ unchanged since Taxpayer Relief Act 1997 - NOT inflation-indexed. OBBBA did not modify. 2-of-5 ownership and use tests (730 days). Surviving spouse $500K within 2 years §121(b)(4). Nonqualified use ratio §121(b)(5) with TRAILING period exception (post-residence rental within 5-year window EXEMPT). Depreciation recapture max 25% §121(d)(6). Partial exclusion safe harbors: 50-mile employment, physician health, unforeseen circumstances. Military 10-year suspension §121(d)(9). §1031 replacement 5-year holding §121(d)(10). 2026 LTCG brackets per Rev. Proc. 2025-32.

Section 1245 ordinary income recapture and Section 1250 unrecaptured gain max 25% rate under §1(h)(1)(D). §1245 property (tangible personal + specified real per §1245(a)(3)) - ALL depreciation recaptured as ordinary up to gain. §1250 property (most real property) - "additional depreciation" recaptured as ordinary (usually zero post-1986 straight-line); unrecaptured §1250 gain max 25%. OBBBA P.L. 119-21 100% bonus depreciation PERMANENT for property acquired after January 19, 2025. New §168(n) qualified production property treated as §1245. Notice 2026-11 component election for self-constructed property. §179 expensing CONVERTS real property to §1245 to extent expensed (HVAC, roof, fire protection - 37% ordinary instead of 25% unrecaptured). §1031 preserves recapture. §453 installment §1245 immediate §1250 ratable. §291 C-corp additional 20%. §199A: §1245 recapture IS QBI; §1250 unrecap NOT QBI per §199A(c)(3)(B) - OBBBA retained 20% rate. §1014 step-up eliminates recapture.

Self-rental rule complete mechanics. Treas. Reg. §1.469-2(f)(6) recharacterizes NET RENTAL INCOME from property leased to a trade or business in which the taxpayer materially participates from PASSIVE to NONPASSIVE - but only for income. Net rental LOSSES remain passive (asymmetric one-way door). Prevents taxpayers from artificially generating passive income to absorb passive losses while preserving passive loss limitation on losses themselves. Classic fact pattern: physician owns medical practice through S-corp; owns office building separately; building rent recharacterized as nonpassive. Recharacterization is AUTOMATIC - no election. Triggers: (1) property rented for use in trade or business activity; (2) taxpayer materially participates in tenant business under §469(h) / §1.469-5T. Caselaw: Krukowski v. Commissioner 114 T.C. 366 (2000) upheld validity; BEK Real Estate Holdings (5th Cir. 2016) confirmed S-corp/S-corp application; Williams T.C. Memo 2015-76. Grouping cure §1.469-4(d)(1)(i)(C) proportionate ownership - rental + operating business combined as single activity eliminates self-rental treatment; Rev. Proc. 2010-13 disclosure required. REPS §469(c)(7) coordination. NIIT §1411(c)(1)(A)(i) exemption for self-rental nonpassive income. Cost segregation trap - losses still passive.

Vacation home and mixed-use rental tax guide: the §280A three-category framework based on personal vs. rental use days, the 14-day

MACRS, bonus depreciation, adjusted basis.

100% permanent under OBBBA. Cost segregation interaction.

§179, luxury auto limits, SUV exception.

De minimis safe harbor, §179 expensing.

Like-kind exchanges, QI requirement, basics.

Boot, 45/180-day rules, reverse exchanges, related party.

Boot, deferred gain, basis in replacement property.

$250K/$500K home sale exclusion, ownership/use tests.

Defer and exclude capital gains.

Homestead exemption, SOH cap, portability.

Section 1031 boot guide: when boot is recognized in a like-kind exchange, cash boot from net cash received, mortgage boot when rep