100% Bonus Depreciation + REP status = TAX FREE Roth Conversion?

[Russell Roberts]

Here's a tax optimization idea I'm considering.  

1) Make some new passive real estate syndication investments with 100% Bonus depreciation to create large K-1 losses in a given tax year.

2) Perform significant (750+ hrs) hands-ons renovation/remodel work on some currently owned single family rentals in order to qualify for REP status in the same tax year.

3) Convert pre-tax IRA to Roth IRA equal to the amount of K-1 investment losses. Since the REP status allows the K-1 losses to be treated as non-passive, it could be deducted against the ROTH conversion related income, I think?

Comments appreciated.

[Michael Plaks]

Quote from @Russell Roberts:

Here's a tax optimization idea I'm considering.  

"Since the REP status allows the K-1 losses to be treated as non-passive..."

No, it does not, in most cases.

Read this please: https://www.biggerpockets.com/forums/51-tax-legal-issues-con...

Generally speaking, if you believe that you just discovered some tax magic not already being used by every other investor, then you're likely overlooking something. :)