4 ms·

Yeah i think that makes a lot of sense - the main benefit on RE though is in the tax shield if you invest DIRECTLY so the tax benefits can pass through, vs. a R

Yeah i think that makes a lot of sense - the main benefit on RE though is in the tax shield if you invest DIRECTLY so the tax benefits can pass through, vs. a REIT. The depreciation recapture can be avoided if you handle it in the correct way, e.g. 1031 exchange or hold. But I agree there's more risk and it's hard to be consistently on the winning side. On the stock market front, what's your current approach allocating things? e.g. Do you do more like a wealthfront / betterment type of portfolio, or something more sophisticated? Would like to learn more on that front for sure.

garmaine 6y ago
But you’re not really gaining anything! Those purported tax benefits mostly aren’t. It’s more like “tax trade offs”. When an asset depreciates, yes you can write off the loss. However that lowers the cost basis, so you then pay taxes on it again when you sell. In the end you are getting to offset some current income taxes with future capital gains taxes. There is some benefit due to the differing tax rates, but that is offset by various costs along the way. It’s hardly a clear win. (And AFAIK REITs have the exact same tax situation, so it is comparable. Holding the REIT doesn’t let you pass through the tax benefit, but they are realized by the REIT and reflected in share price.)
- tech_taxpayer 6y ago
  yeah so two points on that, first the gain at sale can be avoided through 1031 sec of tax code, effectively providing tax shelter, similar to how unrealized gain in stock but even more flexible as it allows you to switch asset classes (like kind swap). Tax aside, there's also the leverage. I can put down 5% and loan 95% to get 100% of the return of investment with exceedingly low interest the federal banking system subsidized for housing as a necessity, vs. commercial loans, but essentially doing this as business endeavor. By the end of all that, I can even offset income with the interest expense, the only loophole on interest expense remained in tax code. So folks are doing this all day long. You can't really do that with stock, or you face the ridiculous rate in margin trade. The leverage plus tax benefit allows wealth accumulation over time.
  - garmaine 6y ago
    You seem to know what you want to do, so good luck to you.

garmaine 6y ago

But you’re not really gaining anything! Those purported tax benefits mostly aren’t. It’s more like “tax trade offs”. When an asset depreciates, yes you can write off the loss. However that lowers the cost basis, so you then pay taxes on it again when you sell. In the end you are getting to offset some current income taxes with future capital gains taxes. There is some benefit due to the differing tax rates, but that is offset by various costs along the way. It’s hardly a clear win. (And AFAIK REITs have the exact same tax situation, so it is comparable. Holding the REIT doesn’t let you pass through the tax benefit, but they are realized by the REIT and reflected in share price.)

tech_taxpayer 6y ago
yeah so two points on that, first the gain at sale can be avoided through 1031 sec of tax code, effectively providing tax shelter, similar to how unrealized gain in stock but even more flexible as it allows you to switch asset classes (like kind swap). Tax aside, there's also the leverage. I can put down 5% and loan 95% to get 100% of the return of investment with exceedingly low interest the federal banking system subsidized for housing as a necessity, vs. commercial loans, but essentially doing this as business endeavor. By the end of all that, I can even offset income with the interest expense, the only loophole on interest expense remained in tax code. So folks are doing this all day long. You can't really do that with stock, or you face the ridiculous rate in margin trade. The leverage plus tax benefit allows wealth accumulation over time.
- garmaine 6y ago
  You seem to know what you want to do, so good luck to you.