All Forum Posts by: Steve Schaeffer

As a CPA focusing on real estate taxation, I frequently encounter property investors excited about cost segregation studies. And why not? The promise of accelerated depreciation and immediate tax savings is attractive. However, there's a critical detail that many tax advisors conveniently overlook when promoting these studies.

Here's the uncomfortable truth: If you're a high-income earner (AGI > $150,000) and not actively managing your properties, those promised tax savings might be locked away for years. 🔒

Let's break this down:

Under IRC §469, rental real estate activities are considered "passive" by default. Unless you qualify as a Real Estate Professional (which has strict requirements), your rental losses can only offset passive income. If you're earning primarily W-2 wages, interest, or dividends, those attractive depreciation deductions from your cost segregation study will be suspended.

Think about it this way: You might spend $10,000-$15,000 on a cost segregation study, expecting immediate tax savings, only to find those deductions suspended indefinitely.

Does this mean cost segregation studies are worthless? Absolutely not. But timing and planning are crucial.

Here's what you need to consider:

1. Future Passive Income: Do you expect to generate passive income from other sources?
2. Exit Strategy: When do you plan to sell the property?
3. Professional Status: Could you qualify as a Real Estate Professional?
4. Income Levels: Will your AGI decrease in future years below the $150,000 threshold?

Mitigation Strategies:

• Consider qualifying as a Real Estate Professional
• Generate passive income through strategic investments
• Plan property dispositions to release suspended losses
• Make appropriate grouping elections
• Structure leases to demonstrate active participation

The Bottom Line:
Cost segregation studies remain a valuable tax planning tool. However, understanding the passive activity loss limitations is crucial before making this investment. The time value of money still favors acceleration, but only if you have a clear path to eventually utilizing these losses.

Don't let your tax savings get trapped in passive activity loss limbo. Consult with a qualified tax advisor who understands these limitations and can help develop a comprehensive strategy aligned with your specific situation.

Remember: The best tax planning looks beyond immediate deductions to your complete financial picture. 📊

Bruce Kowal, CPA, MS Taxation
#RealEstateTax #PassiveActivityLoss #TaxPlanning

I have invested thru 1031 exchange almost 1.5 M in to 3 Crew (Versity) DSTs about 3 years ago: Inspire on 22nd, Astoria and Shadowglen. My broker (Cornerstone RE Investment Services) was giving me some updates until about 6 month ago and suddenly stopped responding to calls/emails. Crew stopped distribution on these 3 DSTs last May. Promised to renew 1st Qtr 2025. Nothing happened yet, I suspect a big fraud there. Does anybody know if any actions investors can take before its too late. Will appreciate any help.

Thank you to all the Crew/Versity Investors who have gotten in touch with me. I did want to point out that there is another forum on Reddit that has comments just like I have been hearing from you on Bigger Pockets. Here is the link.

https://www.reddit.com/r/realestateinvesting/comments/1ff1ew6/any_feed_back_on_a_dst_sponsor_called_crew/

Encouraging all Crew/Versity investors to reach out to me, I am interested in your experiences with Crew/Versity DST's. I am learning a lot and I appreciate it. The more I can learn about the 13 Crew properties with suspended distributions or other distress the better.

Your current cost basis should carry forward and continue on your REIT OP investment. Meaning, your depreciation schedule should continue.

Do you have an *option* or are you *forced* to participate in the REIT? Does the REIT pay its cash dividend out of operating cash flow (AFFO), or is it paying its dividend out of paid-in capital?