@Tim Jernberg, The reason for doing the drop n swap is that one of the requirements of the 1031 exchange is that whoever the taxpayer is for the old property must also be the taxpayer for the new property.

The catch-up contribution for taxpayers aged 50 and older increased to $1,100.

However, If you own a property with an average period of customer use of 7-days or less (or 30 days or less with substantial services provided (a different conversation)), it can be treated as a "business" for tax purposes.Now that it's in this business "bucket", the taxpayer can materially participate (7 tests) in the operations in order to treat the activity as non-passive.

So, every taxpayer can use it, so long as they have use for the additional deductions. 

To materially participate in a real property trade or business, the taxpayer must be involved in the operations of the activity on a regular, continuous, and substantial basis (IRC Sec. 469(h)(1)).Participation hours in real property trades or businesses in which you materially participate are those that affect the day-to-day operations of the business.For landlords, that can mean:●Hours spent acquiring property (not research hours!)

Even if a partnership contribution can be nonrecognition in other contexts, contributing the replacement property shortly after the exchange can raise “held for investment” and step-transaction issues, and the IRS could argue the taxpayer effectively exchanged into a partnership interest.If the goal is passive exposure to a professionally managed pool while preserving 1031 treatment, the structures that are typically workable are:A DST that holds real estate (properly structured DST interests have IRS support for 1031 treatment if all exchange requirements are satisfied).A TIC co-ownership interest in real property, structured to remain co-ownership and not a partnership.If you want, share whether the investor has already closed the sale, and whether your fund would be open to offering a DST or TIC class tied to one or more specific properties.

Cost segregation is generally most advantageous for taxpayers in higher marginal tax brackets who intend to hold rental real estate as a long-term investment.

They know cost segregation and will prepare a very complete, comprehensive, well documented study regardless of whether the taxpayer can use the deductions or not.Let me know if you would like some recommendations and I can forward you some contacts.Joe

Inspired Healthcare also cancelled several clients DST's and returned the funds, you can see how this is problematic for the taxpayer if they are past the 45th day to identify alternative investments!

In addition, the concepts or Basis and At Risk, are beyond most Taxpayers.]Plus 20% accuracy-related penalties.Total deficiencies: $24,451 (2013) and $14,440 (2014)Total penalties: $4,890 (2013) and $2,888 (2014)The case doesn't say how their returns were prepared.