J.K. Lasser's Your Income Tax Professional Edition 2017

Chapter 31 Tax Savings for Investors in Real Estate

1. 31.1 Real Estate Ventures
2. 31.2 Sales of Subdivided Land—Dealer or Investor?
3. 31.3 Exchanging Real Estate Without Tax
4. 31.4 Timing Your Real Property Sales
5. 31.5 Cancellation of a Lease
6. 31.6 Sale of an Option
7. 31.7 Granting of an Easement
8. 31.8 Special Tax Credits for Real Estate Investments
9. 31.9 Foreclosures, Repossessions, Short Sales, and Voluntary Conveyances to Creditors
10. 31.10 Restructuring Mortgage Debt
11. 31.11 Abandonments
12. 31.12 Seller’s Repossession After Buyer’s Default on Mortgage
13. 31.13 Foreclosure on Mortgages Other Than Purchase Money
14. 31.14 Foreclosure Sale to Third Party
15. 31.15 Transferring Mortgaged Realty

Real estate investors may take advantage of the following tax benefits:

• Gains on the sale of investment property may be taxed at capital gain rates.
• Depreciation can provide a source of temporary tax-free income (31.1).
• Rental income can be used to offset passive losses Chapter 10.
• Tax-free exchanges make it possible to defer tax on exchanges of real estate held for investment (31.3).

However, real estate gains may be subject to the 3.8% net investment income tax (28.3).

Losses on real estate transactions may be subject to the following disadvantages:

• Rental losses may not be deductible from other income such as salary, interest, and dividends unless you qualify as a real estate professional or for the special $25,000 rental loss allowance under the passive loss rules Chapter 10.
• Compromises of mortgage liability ...