Using Leverage for New Depreciation Benefits

Linda purchased a small commercial property in the early 1990s and enjoyed stable income for decades. But because the property was fully depreciated, she was now paying taxes on 100% of its rental income—significantly reducing her net cash flow.

 

 

Client:

Linda Chen

Website:

N/A

Date:

August 14, 2020

Category:

Real Estate

new depreciation benefits
01. Сhallenge

Re-Introducing Depreciation After 30 Years of Ownership

Client: Linda Chen
Profile: Owned her property for 30+ years, no debt, fully depreciated asset

Linda purchased a small commercial property in the early 1990s and enjoyed stable income for decades. But because the property was fully depreciated, she was now paying taxes on 100% of its rental income—significantly reducing her net cash flow.

Her goals:

  • Increase after-tax income
  • Exit property management
  • Add new depreciation opportunities
02. Solution

We exchanged her property into a 40% LTV leveraged DST portfolio, allowing her to:

  • Establish new depreciable basis
  • Use that depreciation to shelter the new DST income
  • Increase cash flow while reducing her tax burden
03. Outcome
  • Linda significantly increased her net spendable income
  • She reintroduced depreciation she thought she’d never see again
  • She fully retired from active management

“I didn’t realize how much I was giving up in taxes until we restructured everything.”

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PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS: The case study does not reflect actual clients. Any reference to securities is based upon historical data that is publicly sourced. No statement made herein is to suggest stock market performance or future performance, and no case study is used to imply future performance. The case study is intended to illustrate services available through the adviser. They do not necessarily represent the experience of any clients.

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