Tax mitigation strategies

Plano, TX · Member since 2012 · 43 posts · 10 votes

Hello, I have been researching companies with alternative ideas on investing to offset my potential IRA->Roth conversions. As a result I found 2 investment areas that hold the most promise and largest reductions. Workplace housing and Heavy Equipment. I have heard 2 presentations and found the IRS rules to promote this type of investment. Has anyone worked with these 2 companies or similiar? stockalternatives.com and wealthconcepts group.com? They both have presentations for a business model investing in Heavy equipment that appear to yield signficant tax advantages. They both do require 100 hour participation.

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Chris SeveneyBusiness Member

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

3mo

I always want to caution people when looking at these strategies to make sure they are still good investments. Sometimes people will get so caught up in tax savings they ignore the underlying assets. An example of this has been some DST investments that were heavy front loaded fee driven investments that are great for tax deferments but challenging on the investment side

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3mo
I always want to caution people when looking at these strategies to make sure they are still good investments. Sometimes people will get so caught up in tax savings they ignore the underlying assets. An example of this has been some DST investments that were heavy front loaded fee driven investments that are great for tax deferments but challenging on the investment side
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Mark C.
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Plano, TX · Member since 2012 · 43 posts · 10 votes
3mo
True which is why I am seeking outside potential investors that has worked with these companies. I am also having my accountant review the strategies.
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
3mo
Hey Mark! Chris makes a really important point that's worth sitting with, the tax tail should never wag the investment dog. The best tax strategy in the world doesn't save you if the underlying investment underperforms or has fees that eat into your returns.
I have not worked with these companies but I figured I would still give you my 2 cents.

On those strategies you're researching, workplace housing and heavy equipment investments can absolutely have real tax advantages. The 100-hour material participation requirement you mentioned aligns with the IRS framework where active participation can potentially make losses non-passive and usable against other income. That part of the IRS framework is legitimate and well-established.

The due diligence question is really about the specific companies and investment structures involved. A few things worth pressure-testing before committing, what are the total fees and how do they impact net returns, what is the actual historical performance of the underlying assets, how liquid is the investment if you need to exit, and how exactly the tax benefits are being generated and whether they've been tested under IRS scrutiny.

The fact that your accountant is already reviewing the strategies is exactly the right move. I'd also make sure whoever is reviewing it has specific experience with these types of alternative investment structures rather than just general tax knowledge, since the nuances matter a lot here. Definitely worth getting a thorough review before committing capital. Happy to connect!
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Denver McClurePro Member
Financial Advisor · Dallas, TX · Member since 2018 · 659 posts · 479 votes
3mo
Hey @Mark C., talk with @Jeff Nash when you have time. He's a CPA here in DFW and is very familiar with heavy equipment tax strategies.
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
3mo
First I agree with both posts that to summarize point out a poor investment is not a good investment based on the tax savings alone. The investment has to be a good investment that also results in tax savings.

I have never heard of those means to write off active profit.

But I did want to make sure you are aware of the two means to write off passive losses against active income that are commonly discussed in this forum:

- Real Estate Professional (REP): requires a lot more hours than the STR exemption and therefore not possible for some households

- STR Exemption (sometimes call STR loophole)

These are often combined with cost segregation to perform accelerated depreciation.

I suspect you can get a lot of info on these 2 methods on this forum or by searching the internet.

If you choose one of these methods, do your due diligence to ensure it is a good investment. It is no benefit to loose money on an investment simply to write off some active income.

Good luck
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Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 899 votes
2mo
The most important thing here is not letting the tax tail wag the investment dog, because even a great write-off doesn't do you any good if the underlying deal underperforms or the fees eat up your returns. I haven't personally worked with either of those companies, but on the strategies themselves, workplace housing and heavy equipment deals can carry real tax advantages, and the participation piece you mentioned lines up with the IRS framework where being active enough in the business can make the losses non-passive and usable against your other income. The real due diligence is on the specific sponsors and structures though, so I'd dig into the total fees and how they hit your net returns, the actual track record of the underlying assets, how easily you could get out if you needed to, and exactly how the tax benefits are generated and whether they'd hold up if the IRS took a closer look. Having your accountant review it is the right move, and I'd just make sure whoever does it actually has experience with these kinds of alternative structures rather than just general tax knowledge, because the details really matter here. Ultimately it comes down to your own facts, so it's worth getting a thorough review from your own CPA before you commit any capital.
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