The 100-Year-Old Tax Secret Most Investors Don't Understand | EP 1
In this episode of Unlock Your Passive Lifestyle, Tommy Thompson and Justin Kiehne dive into one of the most powerful - and most misunderstood - tools in real estate investing: the 1031 exchange. Whether you own a single rental condo or a multi-million-dollar commercial portfolio, this conversation covers what you need to know before you sell.
What You’ll Learn
* The basics of Section 1031 — a 100-year-old section of the tax code that lets you defer capital gains when exchanging investment real estate for like-kind investment real estate
* The real cost of NOT doing an exchange — 20% federal capital gains + state taxes (up to 13% in California) can mean a 30%+ haircut on your equity
* The critical timelines — day 0 (closing), day 45 (identification deadline), day 180 (purchase deadline), and why weekends and holidays count
* The three identification rules — with a deep dive into the three-property rule and why you should always use all three slots as “parachutes”
* The three rules for a fully tax-deferred exchange — equal or greater purchase price, reinvest all equity, and replace all debt
* Net lease vs. DSTs — the pros and cons of owning a single Home Depot or Walgreens versus buying a fractional interest in a diversified portfolio
Key Timestamps
* 00:00 — The misunderstood 1031 exchange
* 02:03 — The real math on a $1M sale: $300K–$400K in taxes to Uncle Sam
* 05:24 — Prep work and the qualified intermediary
* 07:50 — The 45/180 day clock and why end-of-year sales are dangerous
* 09:37 — The three identification rules (and the “parachute” strategy)
* 11:00 — Justin’s $10M Marina horror story
* 15:29 — The three rules for a fully tax-deferred exchange
* 18:15 — Like-kind, explained: it’s broader than you think
* 19:05 — Farm land → mobile home parks (a real client story)
* 21:02 — Net Lease 101
* 25:40 — DSTs: institutional real estate in $100K slices
* 29:02 — For the business-owner: sell the business and 1031 the real estate
* 32:27 — Passive lifestyle & real estate retirement
Who This Episode Is For
* Real estate investors considering a sale
* Business owners prepping for retirement
* Baby Boomers planning their real estate exit
* Growth investors using 1031s to build wealth faster
* Brokers, CPAs, and attorneys looking for client strategies
This is for informational purposes only, does not constitute individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance.
Because investor situations and objectives vary this information is not intended to indicate that an investment is appropriate for or is being recommended to any individual investor.
There are material risks associated with investing in private placements, Delaware Statutory Trusts ("DSTs") and real estate securities including the potential loss of the entire investment principal, illiquidity, tenant vacancies impacting income and revenue, general and real estate market conditions, lack of operating history, interest rate risks, competition, including the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and investors should read the PPM carefully before investing paying special attention to the risk section.
Risks associated with 1031 exchange- A 1031 exchange has an identification period of 45 days from the sale of the relinquished property to identify a potential replacement property or properties depending on the value of the previous property. To defer all capital gains tax, you must reinvest the entire net proceeds from the sale of the relinquished property into the replacement property and acquire debt on the new property that is equal to or greater than the debt on the property that was just sold and relinquished.
DST 1031 properties are only available to accredited investors which are typically defined as having a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last two year.
The rules and regulations of the Qualified Opportunity Zone (QOZ) Program are complex, and compliance with the QOZ Program comes with significant challenges such as appreciation unpredictability, certain neighborhoods may be less accommodating to development, illiquidity for up to ten or more years, availability and cost of construction and development financing uncertainty, development and redevelopment real estate risks, as well as a number of Jobs Act interpretation uncertainty which may impact future risks, if any.
Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Fortitude Investment Group, LLC is independent of CIS.
