Live Tax Q&A for Business Owners: 13 Real Questions, Answered (August 2026)

Lightly edited for readability: filler words and false starts are removed and misheard terms are corrected. Timestamps match the video above. This conversation is educational and is not tax, legal or investment advice.

0:00 · The big quotes

Laura Dohanes: Can somebody give me more Roth? I'll take it. Rental real estate, by law, is passive. And if your accountant can't do that for you, you have the wrong accountant for what you need.

0:26 · Welcome: what this Q&A is

Laura: Let's get started. Hi, everyone. I know it's not early morning for those of us on the East Coast, but if it is for you, grab some coffee and let's have some interesting conversations. If you're here today, it's probably because you're part of our community, and these Q&A calls are my thank-you for being part of what we do and what we stand for. My heart is to come and serve you and answer questions. We get questions by email and questions sent to us ahead of time, and if you have questions today, put them in the chat, which is working, or in the Q&A. Hey, Bill from Atlanta. Bill sent a question here.

1:14 · Exiting 3 rentals at 74: the 1031 question

Laura: Bill says: "My wife and I own two long-term rentals and one short-term vacation rental. We actively manage both the long- and short-term properties. We bought the short-term rental through a 1031 exchange, did a structural engineering survey and accelerated the depreciation. We're both 74 and looking to sell, or at least stop actively managing all three units, within the next year or two. We want to legally minimize both the capital gains taxes and the clawback as we sell or stop active management. One option we see for the 1031 property is to keep doing 1031s into passive investment properties, using the swap-till-you-drop strategy, and let our family inherit at current market value."

Laura: Great setup, and thank you for the background; it helps a lot. So the questions are: on the short-term rental 1031 property, does swap-till-you-drop also stop the clawback along with the capital gains? And second, if we make it our full-time residence for two years as a couple, can we exclude $500,000 of the capital gain on the 1031 property? I think you were running out of space on that one.

Laura: Here's what I'd encourage, not just for you but in every situation with a short-term rental or any real estate, and I talk about this a lot. When you buy a property, you need an idea of why you're getting it and what you're trying to do with it, because the goal dictates the action you take. If you've heard me talk for any length of time, you know I always say each dollar you put into an investment can do three things for you: give you appreciation, cash flow or a tax write-off. In your case, you're probably not getting much of a write-off now, depending on how you exchanged into the 1031 initially. My assumption is that these properties were generating cash flow, but I don't know.

Laura: So analyze what you're trying to exchange. Are you trying to replace the cash flow, or just find a different exit? Each means something different. Whether you still want to keep the properties isn't clear, and it's a loaded question that can go a million ways depending on your goal. So I'd always take a step back: am I trying to exit the properties? Keep the same cash flow with a different setup? Or I don't need the money and just want to roll it into the next vehicle or investment? Each gives you a different answer.

Laura: When you switch a short-term rental to a long-term rental, or to passive, there's a transition. A lot of people don't understand that a short-term rental isn't a long-term solution. It works while you manage it, and it can be advantageous for a number of years on a property. Could you exchange into another one and do the same thing? Yes, you can keep your benefits. But when you're changing your involvement, from actively managing and participating to passive, you have to look at your alternatives based on the ultimate goal you're trying to reach.

Laura: I know you want a real answer, and it's tough to say this way or that way because it can go multiple ways. Sit back and ask: am I trying to preserve my cash flow, or do I not care about cash and just want to grow my wealth? Where do I move next? Those two will make the options much clearer. And making it your full-time residence changes things completely. So it comes back to the same question: preserve cash flow, grow your wealth, or fully exit? I hope that answers your question, Bill. Some of these are very nuanced and may need more conversation, so feel free to chat with me offline.

5:50 · S-Corp made an extra $70K? Do this first
Full write-up: start with reasonable compensation

Laura: Next, from Giselle: "I earned an additional $70,000 this year. What can I do now to lessen my tax impact for the 2026 filing? I'm an S corp, and I'm a customs broker." S corps are one of my absolute favorite entities for an operating company. When you're operating a business, it gives you some of the benefits of a small enterprise and some corporate benefits. I don't know whether you've used the basic strategies, but with an S corp you always begin with the basics: the income coming in, the cost of doing business, and then the very first thing I look at, reasonable compensation.

Laura: Reasonable compensation can go many directions. One customs broker might say, "I pay myself $50,000 a year," and for another person, when you run it, it comes out to $150,000 or $200,000. From there, you have options based on your wages. In an S corp, the first step is always wages, and here's the biggest issue. Again, Giselle, I don't know the full story. You have an additional $70,000, but it doesn't say whether your total is $70,000 or $670,000, which makes a difference. You have the option to take no wages and take everything as distributions, or to say, "I'm not taking money; I have wages and income from other places." That gap between what you pay yourself in wages and what you take out in cash from the S corp can trigger a lot of issues with the IRS.

Laura: So for an S corp, before you do anything, I always begin with wages. The wages you pay yourself are the foundation that lets you strategically take more expenses and deductions in the S corp. If you get our emails, you know we send a lot about S corps and tax strategies, and it all starts with being an employee. Once you're an employee of your S corp, it unlocks so many things: accountable plans, the Augusta strategy, and much more. But it always begins with wages. I love that question, Giselle, so thank you for asking, because it's not asked enough, and it's the one that gets S corps in trouble. Whether you make $70,000 or a million and $70,000, it's the same issue that triggers the IRS over and over.

8:48 · My city banned Airbnb. Do I still get the tax benefits?
Full write-up: short-term rental bans and your tax benefits

Laura: Jed is asking: "What tax advantages are available for a residential property that has a short-term rental entitlement in a city that doesn't have many legally operating STRs?" I'm trying to understand the question. Tax law and local law are different things. For example, in the 2021-22 era, lots of people bought short-term rental properties in Lake Tahoe, California, and then local law disallowed new short-term rentals. Nobody could get licensing for Airbnb or other short-term rentals anymore. So local law has nothing to do with what's available to you federally. On the tax side you can still have a short-term rental, but locally the law prohibits it, so there's always going to be a gap between local law and what you can do on the tax side.

Laura: Tax requires very specific questions, and I'm not dodging the answer. Tax law is driven by calculation. To know what can be advantageous, you have to do the math, at least add or subtract something. Being very specific yields better results. Here's what a question with a clear tax answer looks like, and I'm not picking on you; this is for everyone. "I have a short-term rental producing $200,000 of gross revenue a year. I manage it, and it costs me roughly $100,000 a year, so I have $100,000 of profit. My average stay is less than seven days and I provide services. How can I make this more advantageous?" That sets a different direction: how are we optimizing? Do we need a cost segregation study? Maybe you have multiple short-term rentals and need a management company. The more specific the question, the more specific the response. So please think in very specific terms when it comes to tax, to get a real answer for yourself. Thank you for asking, Jed, and I hope that was helpful.

11:58 · Should my rentals live in an S-Corp?
Full write-up: why an S corp can lock up rental losses

Laura: Another question, from Ben: "With an S corp, after reasonable compensation, the income is passive, correct? So then real estate depreciation reduces the non-W-2 part of the income?" Very interesting question, Ben, and I'll answer it the best way I can. S corps, by nature, are meant to be active businesses. This is where a lot of people make mistakes when they open companies: "My brother has an S corp and manages his properties through it," or everybody on the feeds and the internet is pushing S corps. I'd think very hard before saying an S corp is the best structure, because I've seen many scenarios where an S corp hurts people more than it helps.

Laura: Think of an S corp as an entity for active management. Here's a scenario. I own properties. You can own them in any type of LLC, anywhere you want, in a trust, however you like. Where an S corp fits best is an operating business with active involvement, like the management company for my multiple properties, a consulting business or many other services. Can you do e-commerce in an S corp? Absolutely. Manufacturing? Yes. But it has to involve active participation.

Laura: I've seen a lot of people file S corporations with passive income, and that's where there's a conflict between what the law says and what people perceive. S corps should be used for active businesses, whereas rental real estate, by law, is passive. Even with active participation, unless you meet exceptions to the rule, rentals are generally passive by law. That's where people get mixed up when they hold real estate in an S corporation, and now the S corporation is treating everything as passive. So the question becomes: are you in the right entity? It might hurt you or make things unavailable to you.

Laura: So the question may not really be how to reduce income with real estate depreciation. It could be that you're not in the right entity. I'm not saying you're not; I'm saying that if I'm reading your scenario correctly, you might be in the wrong container for the income you're collecting and the assets you're holding. Real estate is a very particular asset, and it depends on what you do with it. A lot of you are in real estate, which is one of my favorite topics, and people get this wrong a lot.

Laura: Picture two people in real estate. One has rentals, say 10 or 20 units, not 100-plus. The other does flips, maybe 10 or 20 flips. Is it the same story for tax? No. Is the same entity best for both? Probably not. Anything that acts like a business activity day in and day out, with operations, functioning like an operating business, is the best fit for an S corp. Real estate rentals aren't a continuous operation, even though it may seem like it, and I've seen people work a whole lot in real estate. It's not that you don't work. But it's not continuous operation like other businesses, so an S corp may not be best for your rentals, unless you're doing management for multiple entities.

16:28 · Follow-up: is the K-1 active or passive?

Laura: Ben follows up: "With an S corp, the W-2 is active and the income from the K-1 is passive." Yes and no. Don't you like my answers? We could all be very good buddies. In an S corporation, W-2 income is always active income. That's what a W-2 is: you're actively providing services to a company to earn income. K-1 income from an S corp should, by nature, be active. If you're not actively participating, it could be passive. I don't like to see S corps with passive income, for various reasons. I just don't see much use for them that way. Could you have a passive K-1? Yes. But if you're actively involved in running the business, a passive K-1 is probably incorrect. The K-1 should be active.

17:29 · Home office reimbursement + Schedule A
Full write-up: home office reimbursement and Schedule A

Laura: Therese asks: "If my LLC reimburses me for the office portion of real estate taxes paid on my home, can I also deduct the total amount of real estate taxes on Schedule A of my Form 1040?" First, why would your LLC reimburse you for the office portion? It depends, and this can go multiple ways. The more detail you give, the more detailed my answer can be. I don't know how your LLC is treated: a sole proprietorship, a partnership or an S corp. When you say reimbursement, that sounds like an accountable plan, which you'd most likely find in an S corp, so I'll assume that based on the language you used.

Laura: So say you have an LLC taxed as an S corp that reimburses you for the home office share of your real estate taxes. Can you also deduct the total real estate taxes? No. With an accountable plan, you have to prorate. Real estate taxes have a very specific calculation, so tell whoever files your tax return how much was used for the reimbursement. And I'll go a step further: if you're reimbursing real estate taxes, you probably do the same for mortgage interest or depreciation on the house, and that needs to be tracked as well. Make sure whoever prepares your personal return knows that a portion has been reimbursed as a home office expense through your S corp. That requires tracking. Great question, Therese.

19:35 · Getting slaughtered on W-2 taxes: the fix
Full write-up: the W-2 withholding fix

Laura: Methodius, I hope I'm saying your name correctly, asks: "I'm a W-2 employee for now, and I also have an S corp and an LLC. The way you set exemptions on your W-2 has changed. I used to claim 6 to 8 exemptions, but now you have to deduct $2,000 per exemption. My accountant advised against it, so I didn't deduct anything, and I'm getting slaughtered. Is it dangerous to deduct? Also, I have around $30,000 of business expenses a year from my S corp, but the accountant only applies $15,000 to $20,000. My salary is around $205,000. Can I do anything else?" Let's break it apart. I love these questions, so thank you for putting it in.

Laura: As a W-2 employee, the point of withholding is that the IRS wants you to pay as you go, and it's the same for business owners now. If you have an S corp, or any pass-through, a partnership, an LLC or rentals, that makes money, your return calculates estimated tax payments for the next year. Why? Because the IRS wants you to pay as you go, ideally in the quarter you make the money. The withholding rules changed because there was such a big gap between what people paid and what they owed. The IRS doesn't want you to get a large refund either. They penalize you when you owe a lot at the end, and they don't want to give you a large refund. It goes both ways.

Laura: So you have to withhold enough to cover what's going on that year, which is very difficult for a lot of people, especially with multiple sources of income. What happened last year may not be what happens this year or next year. Some people get paid in unusual ways: a lot of money this year, two bonuses this year and none next year, just because of timing. So a lot of people are upset that they have to pay estimated taxes in a low-income year based on a prior year when they had most of their income.

Laura: What's the solution? Track your income as you go. Here's my recommendation, since it's August and there's enough time before year-end. Look at how much you've made and project the rest of the year. Say I've made $205,000 and expect another $200,000. I send my accountant a note: I expect $400,000 of income this year, I've had this much withheld, and I expect this much more based on my employer withholding. If you're an employee, ask for additional withholding, or pay estimated taxes at least for the last quarter of the year. If your income isn't consistent every year and you have no way of tracking it, the only way to do this is to calculate what you expect to make for the year.

Laura: I know it's sometimes hard to think about. Look at your last pay stub: if everything stays the same, what will you have? Can you fund retirement accounts? Use other fringe benefits your employer offers? Anything else available to reduce your taxable wages? Then add up all the income coming to you for the year and email your accountant. And if your accountant can't do that for you, you have the wrong accountant for what you need. That's something you need to understand.

Laura: As for whether it's dangerous to deduct: it's not dangerous to deduct the expenses. It's not going to bite you, unless by dangerous you mean having to pay back. You left it to my imagination. The last part of the question was: "I have $30,000 of expenses, but my accountant only claims part of it." Not all expenses are equal. If your expenses are meals, entertainment, home office or car expenses, not everything is deductible exactly as you entered it. Meals are only half deductible. Entertainment is zero. If you take mileage and also enter all your other car expenses, both aren't deductible. So there can be differences, and some things aren't deductible at all.

Laura: One of the things I love is assets. A good asset with strong depreciation is always a good thing, especially if you're going to use it. So I'd also consider assets. They're great to buy, especially if you need them. I'm not saying buy a new car every year; assets can mean many different things. I hope that answers your question.

25:17 · Turning my old house into a rental. Do I need an LLC?
Full write-up: do you need an LLC for rental property?

Laura: Next, a question from Martha: "If we move out of our homestead and rent the property, should we change the title to an LLC or leave it in our names to deduct the expenses?" I don't know whether this is a tax question or an asset protection question. You'd move it into an LLC for protection purposes. If you're trying to get tax benefits, an LLC might do nothing for you. When you have other properties and other goals for them, yes, it can help. The LLC doesn't do anything for you from a tax perspective; it only lets you choose to be taxed in different ways. With only one property, there's not much to gain. Asset protection is a different story, and there could be other reasons you'd want one.

Laura: I also don't know whether this would be a mid-term, short-term or long-term rental. There are all kinds of housing programs now, or you might rent to someone who does something else with it, or corporate rentals. Martha says long-term rental. So for one long-term rental, from a tax perspective, an LLC doesn't do anything, because the LLC flows onto your personal return. If you want it for other purposes, that's a conversation with an attorney, depending on your state. In some states it's not worth having LLCs sitting around, like California, which makes it really difficult because it charges you. Other states, like Florida, are more lenient and don't tax you as much just for having an LLC. So for asset protection, talk to an asset protection attorney. For taxes, there's no real benefit: no additional write-offs you couldn't take otherwise with the property in your name. I hope that answers your question, and thank you for asking, Martha.

Laura: Methodius added that this is helpful even though he's not in real estate, because he intends to reinvest. Thank you, I appreciate that. And Methodius clarified that "dangerous" meant getting audited. I agree, that's a dangerous position.

27:45 · QBI when one business wins and one loses
Full write-up: the QBI deduction with two businesses

Laura: This one's from Jeff: "How does the QBI deduction work if one has two active businesses? Does it depend on the combined net income of the two? In my case, one has a Schedule C net profit and the other a Schedule C net loss. So a QBI deduction is only possible if the combined total is a profit?" Great question. For those who don't know, QBI is, as I call it, a gift. It applies to pass-through businesses, anything that passes through to your individual return: a Schedule C, partnerships, S corps. Not C corps. It gives you 20% of the net, and there are calculations that move it up and down. It has a ceiling, which means that depending on your income, you may qualify or be completely phased out.

Laura: Unfortunately, the QBI calculation does count all of your businesses, and that's especially true with real estate. We've seen people with negative QBI in the millions of dollars that they keep carrying over year after year. Then they have one profitable business and are counting on that 20% QBI deduction, and they can't take advantage of it, because they have large QBI losses carried forward that have to be used up first. So yes, it combines all your businesses: Schedule C, rentals, partnerships and S corps. Great question, Jeff, and one of my favorites, because QBI is permanent now, and if you have profitable businesses, you want to take advantage of it.

30:07 · At what profit does an S-Corp make sense?
Full write-up: the S corp profit threshold

Laura: I have a couple of questions here from Carol-Ann. Let me see if I can make sense of them. "At what profit level does the expense of converting to an S corp make sense?" Good question. Looking just at the S corp structure, with no additional income, we've calculated that somewhere from about $40,000 to about $70,000 it makes total sense to have an S corp, depending on what you do. Here's why: as a consultant or service provider in an S corp, your wages can be relatively small compared to, say, a surgeon. Doctors, anesthesiologists and dentists can't claim a $50,000 wage as reasonable compensation, so that lower level goes higher for them.

Laura: By about $70,000 of net profit, it makes sense for almost everyone to convert to an S corp. But it depends: do you have a spouse who earns income? For some people it makes sense at $10,000 of profit, and some people do it before they even have profit, just because of how their return is set up. The basic rule is that from about $30,000 to $50,000 to $70,000, almost everyone gets a positive net result from an S corp. Carol-Ann mentions this is for a new, fledgling LLC business. So if you want a point in the middle, at about $50,000 of profit you want to have the conversation about whether it makes sense. Sometimes it doesn't make sense at the very beginning, and sometimes it does. It depends on your goals for the business: whether you'll sell or build, how you'll hire, and so on.

Laura: We have a few more minutes, so put any other questions in the chat or the Q&A. And Carol-Ann asked a very off-topic question: what's my secret to such flawless skin? Probably genetics, number one, so thank you, Mom. And number two, probably food. Thank you, I'll take the compliment, Carol-Ann.

32:39 · Cost segregation: write-off or trap?
Full write-up: cost segregation recapture and the 5-year rule

Laura: A follow-up question: "Is cost segregation worth doing, or is it better to live with regular depreciation?" It depends. I know you'd want me to say yes, but it's not always the case. Some cost segregation studies have created amazing results. You buy a property for, say, $500,000 or $600,000, you can take $200,000 of depreciation in year one, and you hold the property for seven or maybe ten years and take full advantage of it.

Laura: The people who benefit most from cost segregation studies are people with more real estate, especially those who keep buying. Real estate is almost like a rolling ball. The first year I buy a property, I do a cost segregation study and write things off. Then I have gains from somewhere else that I can offset, and when I sell properties I buy new ones, so new purchases always offset the sale of another. Real estate is very cyclical. To make the most of it, you have to establish your habits: how often will I buy, and how often will I sell? That gives you the biggest and fastest tax benefit. Otherwise you'll always be stuck. It has to be a designed effort to build real estate for the highest tax advantage. If it's chaotic, you may not need a cost segregation study, or it may not benefit you at all.

Laura: And if you're going to hold a property for two or three years, a cost segregation study can be very costly. Here's why. Say I buy a property for $500,000 and sell it in three years for $700,000. Great, I have a $200,000 profit. With regular depreciation, I didn't split the property into smaller classes, so I have a capital gain and very small recapture. Capital gains mean a top rate of 20%. Great deal.

Laura: Now flip the story. Same $500,000 property, but you do a cost segregation study, assuming you can deduct the losses. A building has an established recovery period: 27.5 years for residential. For a short-term rental, it's 39 years, because the IRS looks at it as commercial property, which a lot of people get wrong. A 39-year life means you can only deduct 1/39 of the building's cost each year. What the cost segregation study does is say: out of the total cost, some belongs to land improvements and some to other property that could be 5-year or 7-year property, not 39-year. That lets you take bonus depreciation on those pieces.

Laura: So you're pulling pieces out of the 39- or 27.5-year class into shorter classes so you can deduct them. You take the bonus depreciation, and it feels like a celebration. Then two or three years later you decide to sell. Because you deducted all of those pieces, they get recaptured as ordinary income when you sell. Now you're not paying 20% tax; you're paying 25% or more on the same property. So if you won't hold a property for more than three to five years, and three is really minimal, you're cutting it very short. It should be five-plus years. Cost segregation studies are wobbly. You really need a very high tax bill in the year you do it for it to make sense.

37:29 · Follow-up: is multifamily residential or commercial?

Laura: "Are multifamily properties classified as residential or commercial by the IRS?" Great question, and here's the interesting answer. Many times, with a multifamily residential property, the IRS looks at it as residential. But with an Airbnb, because you're now like a hotel providing services, it's treated as commercial for short-term rental purposes. Short-term rentals are the trigger for most people: "It's residential, so why is it commercial? Why are they making me use 39 years?" A lot of people get hit with that without realizing it. They depreciate a short-term rental over 27.5 years. And why would a multifamily that's truly a business, with 500 units, be residential? It's very interesting, but a multifamily with residential units is treated as residential in many cases, while Airbnbs are treated as commercial. I hope that answers your question.

38:46 · The Roth 5-year rule
Full write-up: the Roth 5-year rule explained

Laura: We have a question from Ronnie: "I have a self-directed IRA with real estate that throws off continual returns, so I'm rolling principal into a Roth IRA to take advantage of the gains. What is the 5-year rule for continually rolling money into the Roth? Does money from the continual rollover meet the 5-year rule?" Sorry, this is a short idea, and I love short ideas. The 5-year rule is very interesting, and we've actually done some studies on it.

Laura: For those who don't know: self-directed IRAs are IRA accounts you can self-direct into alternatives, meaning real estate, Bitcoin, gold, silver, other things not on the stock market, any type of real estate investment, or syndicated deals you find. With this question, say I have a rental or syndicated deals giving me profits and cash flow, distributions to my plan. Roth IRAs have a very unique feature that's absolutely fascinating, and people aren't using Roths to their full extent. The money in a Roth isn't taxed for as long as you have it, and at 59½ you can pull out the principal and everything that's accumulated tax-free for the rest of your life. Can somebody give me more Roth? I'll take it.

Laura: The question here is about the 5-year rule, which many people don't understand. You can't withdraw certain money until the 5-year rule is met, which means the account has to have been open for five years. There are various rules depending on how you have it set up. Once you've opened the account, contributed and met the 5-year requirement, and there are nuances and exceptions, you're good. If any of you don't have a Roth IRA open, even if you don't qualify to contribute directly, you want one open with some money in it, even if you convert from a different account, so the 5-year clock starts. Once that's done, the box is checked: the account has been open and the 5-year requirement is met.

Editor's note: The Roth 5-year rules have several parts. Your own regular contributions can come out tax-free and penalty-free at any time, while earnings and each conversion have their own 5-year clocks. The full write-up linked at the top of this section walks through each one.

Laura: It's a great tool we can use in planning in various ways. So, your incentive for today, since we only have a few minutes left: if you don't have a Roth IRA open, it's gold. I'd open one to start the 5-year rule. And if you have kids or grandkids you want to bless with something for the future, open those Roth IRA accounts early. Say you've contributed $100,000 for a child by age 18. At 18, the principal you put in, not the growth, interest or cash flow it generated, can come out with no taxes. The difference between a Roth and other accounts is that a Roth is after-tax money. It was already taxed, so it can't be taxed again when you take it out.

42:55 · Follow-up: what if you have multiple Roth accounts?

Laura: Bill has a clarification: "What if you have multiple Roth IRAs? Does each account get the age of the oldest account for the 5-year rule?" That's a great question. It depends, self-directed or not, but you do want to have the accounts open for five years.

43:15 · My honest take on the Trump accounts
Full write-up: a CPA's honest take on Trump accounts

Laura: Wayne asks, "What's your take on the Trump accounts?" I'll take it. I'll take anything that lets me build money with a benefit later on. It doesn't have to be tremendous, and this isn't a lot of money we're talking about. The flexibility at the end, being able to roll it into other accounts, education and so on, is really great.

Laura: Here's why I like it. A lot of kids aren't going to college anymore. We've been trained since our kids were young to put money away for college. I'm not going to discuss whether I'm for or against that, and it doesn't matter. The idea is that if you've saved money for college and your child takes it out for something that isn't an actual educational institution, you get penalized. That doesn't give you many options, unless the child is disabled or other things are going on.

Laura: From that perspective, I like the Trump accounts because they give you options at the end for what to do with the money. The accounts available for kids until now, 529s and kids' Roths, are locked into one purpose, education or retirement. But at 18, 21 or 25, your kid may want to buy a house, buy stocks or buy a business. The beauty of the Trump accounts is that they let you decide. If your kid doesn't want to go one way or do one thing, you can roll it into one of the other accounts. I think that's a great feature, and it's the main reason I like these accounts: the exit, and what you can do with it.

45:23 · Does "swap till you drop" erase the clawback?

Laura: Bill sent a couple of other questions. They're a little long, but let me see if I can get to them, since we only have a few minutes left. He's clarifying his two earlier questions: "I'm trying to understand what happens to the clawback for the accelerated depreciation I've taken on my rentals, in two scenarios. One property is a 1031 exchange short-term rental. Does a 1031 swap-till-you-drop strategy also stop the clawback on depreciation already taken when my family inherits the property, along with resetting the capital gains to the new market value, or will the government still want the clawback?"

Laura: I'd say it depends on when you pass away, and I'd assume the 1031 exchange was done in your personal name, from the way it looks, and isn't sitting in an entity, because that dictates how this goes. Who holds the deed on the short-term rental? I wish I could say it's simply this way or that way. If it's held individually, the clawback could potentially stop, depending on who holds the property.

Laura: As for the alternative strategy, making the same property your full-time residence for two years, that requires actually looking at the historical data. You're looking for a flat answer, and you can't flatten this out and say exactly how it goes, because your history dictates it. The state you're in will matter a lot too. Is it sitting in a trust? What are the nuances of what you have going on? Those would be the first questions. If you want to go into more depth, a one-on-one would be a different conversation. It's too nuanced to just give you the answer, because you have to look at the history, the deeds, whether there are loans, and the value when you convert it to personal use. And you don't have much basis left if you've been doing 1031 exchanges for a while, so even if you make it your personal residence, what does that buy you? That's an interesting conversation.

47:49 · The one question I couldn't answer

Laura: Let me see; I think this one is the same. If anyone has other questions, put them in. Wayne says, "I enjoy these Q&As so much." I appreciate you, Wayne. I think I've answered almost every question here. George asks: "Can you please explain 731 exchanges that are reputable and recommended? Apologies, I meant 721 exchange." I don't know what that is. If you think I know all things, I don't. If you share more details, maybe it goes by a different name. George, you've made me curious, so I'll have to look it up. If you have more on it, do let me know.

48:33 · Closing thoughts

Laura: We're almost at the top of the hour. Thank you so much. I'd love any feedback: anything helpful, any aha moments, anything that made you think "maybe I should do this or get into that." I want you to understand how to ask your questions, so you get what you want from all your scenarios and everything you're doing, and so you can be served. I enjoy these questions very much.

Laura: "Can you please send more newsletters about rentals and taxes?" We could send one every day about rentals and taxes and still not use up all the tax law that's available, which is a great thing, and we're trying to do a lot of that. Thank you for doing the Q&A, Jeff says. I appreciate that. I hope this was helpful, and thank you for being part of our community. Keep your questions coming, and learn how to get what you need from all of this. Thank you, Ronnie. We appreciate you all very much.

Laura: Have a great weekend. We have special guests over the next couple of months. We've had a lot of questions about self-directed IRAs, so stay tuned: next month we have a very special guest on self-directed IRAs, where we'll go deep into very specific real estate questions, and not only real estate. The sessions after that will focus on IRA and Roth questions. Gather your questions as you go, bring your friends, and invite them to join our newsletter so they can enjoy the sessions too. John Bowens from Equity Trust is joining us next month, and it's going to be a great meeting. I love bringing these hard questions to people who know more than I do in some areas. Thank you so much, have a great weekend, and I'll see you in September. Bye, everyone.