J.K. Lasser's Your Income Tax 2023, 2nd Edition

CHAPTER 31Tax Savings for Investors in Real Estate

31.1	Real Estate Ventures	595
31.2	Sales of Subdivided Land—Dealer or Investor?	596
31.3	Exchanging Real Estate Without Tax	597
31.4	Timing Your Real Property Sales	599
31.5	Cancellation of a Lease	599
31.6	Sale of an Option	599
31.7	Granting of an Easement	600
31.8	Special Tax Credits for Real Estate Investments	601
31.9	Foreclosures, Repossessions, Short Sales, and Voluntary Conveyances to Creditors	601
31.10	Restructuring Mortgage Debt	602
31.11	Abandonments	603
31.12	Seller's Repossession After Buyer's Default on Mortgage	604
31.13	Foreclosure on Mortgages Other Than Purchase Money	606
31.14	Foreclosure Sale to Third Party	606
31.15	Transferring Mortgaged Realty	607
31.16	QBI Deduction for REIT Dividends	607

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, rental income and real estate gains usually are 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 ...