{"version":"1.0.0","segments":[{"startTime":5.07,"endTime":5.57,"body":"welcome."},{"startTime":5.57,"endTime":10.1,"body":"You're tuned into taxes, made simple"},{"startTime":5.57,"endTime":10.1,"body":"for a speed round on 10 31 exchanges."},{"startTime":10.34,"endTime":13.28,"body":"My name is chase Berkey,"},{"startTime":10.34,"endTime":13.28,"body":"CEO of dark horse CPAs."},{"startTime":13.34,"endTime":17.15,"body":"And I'm joined by the very first CPA"},{"startTime":13.34,"endTime":17.15,"body":"to take the leap of faith into dark"},{"startTime":17.15,"endTime":20.51,"body":"horses accelerator program, where"},{"startTime":17.15,"endTime":20.51,"body":"he's built a book of business in under"},{"startTime":20.51,"endTime":22.79,"body":"two years, that is approaching 500 K."},{"startTime":23.36,"endTime":26.63,"body":"His name is John Warner and he"},{"startTime":23.36,"endTime":26.63,"body":"is a gentleman and a scholar."},{"startTime":27.33,"endTime":33.39,"body":"Well, uh, gentlemen, well just getting"},{"startTime":27.33,"endTime":33.39,"body":"John, is it true that you had to convince"},{"startTime":33.39,"endTime":37.26,"body":"your wife a dark horse was an actual CPA"},{"startTime":33.39,"endTime":37.26,"body":"for him before she let you accept the job?"},{"startTime":37.935,"endTime":39.405,"body":"Uh, you know, chase, it is true."},{"startTime":39.405,"endTime":43.125,"body":"When I traveled out to San Diego,"},{"startTime":39.405,"endTime":43.125,"body":"I was supposed to be continually"},{"startTime":43.425,"endTime":45.395,"body":"updating her on my location."},{"startTime":45.665,"endTime":48.305,"body":"Uh, she had the movie hostel"},{"startTime":45.665,"endTime":48.305,"body":"in the back of her head."},{"startTime":48.665,"endTime":51.395,"body":"And if you haven't seen it, I'll"},{"startTime":48.665,"endTime":51.395,"body":"tell you it does not end well."},{"startTime":51.635,"endTime":55.625,"body":"Um, you know, you never know when you"},{"startTime":51.635,"endTime":55.625,"body":"meet people through the internet, right."},{"startTime":55.805,"endTime":59.915,"body":"But I can tell you, after over a year"},{"startTime":55.805,"endTime":59.915,"body":"and a half at dark horse, CPS, yay."},{"startTime":60.245,"endTime":64.325,"body":"I'm about 95% convinced"},{"startTime":60.245,"endTime":64.325,"body":"that it's a real CPA firm."},{"startTime":65.129,"endTime":67.53,"body":"Well, that percentage sounds about right."},{"startTime":67.56,"endTime":70.83,"body":"So, uh, today this is a rapid fire round."},{"startTime":70.83,"endTime":74.64,"body":"As the name speed round implies"},{"startTime":70.83,"endTime":74.64,"body":"everyone, including our listeners"},{"startTime":74.85,"endTime":77.399,"body":"needs a cup of coffee for"},{"startTime":74.85,"endTime":77.399,"body":"knowledge absorption on this one."},{"startTime":77.49,"endTime":80.34,"body":"So, John, please tell me"},{"startTime":77.49,"endTime":80.34,"body":"you're not drinking a cup of"},{"startTime":80.34,"endTime":82.699,"body":"folds, no full juice here."},{"startTime":82.789,"endTime":84.229,"body":"I'm actually drinking a local brew."},{"startTime":84.24,"endTime":86.21,"body":"This is a park Avenue coffee there."},{"startTime":86.21,"endTime":87.02,"body":"Costa Rica blend."},{"startTime":87.32,"endTime":87.979,"body":"Pretty good stuff."},{"startTime":88.56,"endTime":89.25,"body":"Beautiful."},{"startTime":89.49,"endTime":92.19,"body":"Well, today's episode"},{"startTime":89.49,"endTime":92.19,"body":"is on 10 31 exchanges."},{"startTime":92.49,"endTime":95.64,"body":"If you own rental properties or are"},{"startTime":92.49,"endTime":95.64,"body":"considering buying properties with"},{"startTime":95.67,"endTime":99.149,"body":"today's ridiculously low interest"},{"startTime":95.67,"endTime":99.149,"body":"rates, you've probably heard of a 10"},{"startTime":99.149,"endTime":101.729,"body":"31 exchange, but what exactly is it?"},{"startTime":101.97,"endTime":102.96,"body":"And why would you do one?"},{"startTime":103.455,"endTime":105.825,"body":"All right, let's start the"},{"startTime":103.455,"endTime":105.825,"body":"clock for five minutes."},{"startTime":106.125,"endTime":111.365,"body":"So, John, what is a 10 31 exchange"},{"startTime":106.125,"endTime":111.365,"body":"the chase, the tenant 31 exchange as"},{"startTime":111.365,"endTime":115.385,"body":"a transaction where you exchange one"},{"startTime":111.365,"endTime":115.385,"body":"rental property for another, hence"},{"startTime":115.385,"endTime":118.655,"body":"the word exchange, even though you're"},{"startTime":115.385,"endTime":118.655,"body":"actually selling the property to a"},{"startTime":118.655,"endTime":123.575,"body":"normal buyer and buying a property"},{"startTime":118.655,"endTime":123.575,"body":"from an unrelated seller, it's called"},{"startTime":123.575,"endTime":129.005,"body":"a 10 31 exchange because 10 31 is the"},{"startTime":123.575,"endTime":129.005,"body":"IRS code section that allows for that."},{"startTime":129.755,"endTime":130.085,"body":"All right."},{"startTime":130.085,"endTime":131.975,"body":"So what is the point"},{"startTime":130.085,"endTime":131.975,"body":"of doing one of these."},{"startTime":133.035,"endTime":137.535,"body":"Well, the point is to be able to defer"},{"startTime":133.035,"endTime":137.535,"body":"the tax that you'd have from the gain"},{"startTime":137.535,"endTime":139.394,"body":"of the sale of the rental property."},{"startTime":139.454,"endTime":142.005,"body":"If you had just sold it"},{"startTime":139.454,"endTime":142.005,"body":"and pocketed the cash."},{"startTime":142.274,"endTime":145.364,"body":"And when you say defer the tax,"},{"startTime":142.274,"endTime":145.364,"body":"how exactly does that work?"},{"startTime":146.385,"endTime":150.375,"body":"Well, essentially, what happens"},{"startTime":146.385,"endTime":150.375,"body":"is the new property that you buy"},{"startTime":150.404,"endTime":152.234,"body":"carries forward the tax basis."},{"startTime":152.625,"endTime":154.454,"body":"Of the old property that you sold."},{"startTime":155.024,"endTime":158.295,"body":"So can you give us an example to"},{"startTime":155.024,"endTime":158.295,"body":"help our listeners digest this?"},{"startTime":159.065,"endTime":159.665,"body":"Yeah, for sure."},{"startTime":159.665,"endTime":164.165,"body":"So let's say you had a bought a"},{"startTime":159.665,"endTime":164.165,"body":"house that you bought for 500,000."},{"startTime":164.404,"endTime":168.665,"body":"Uh, over the years, you've"},{"startTime":164.404,"endTime":168.665,"body":"appreciated it by $200,000."},{"startTime":168.665,"endTime":172.685,"body":"So your current tax basis is"},{"startTime":168.665,"endTime":172.685,"body":"$300,000 in this property."},{"startTime":173.225,"endTime":176.195,"body":"Then you go in and you"},{"startTime":173.225,"endTime":176.195,"body":"sell it for $700,000."},{"startTime":176.584,"endTime":181.654,"body":"If you didn't do a 10 31 exchange,"},{"startTime":176.584,"endTime":181.654,"body":"you'd have $400,000 of taxable income."},{"startTime":182.38,"endTime":187.69,"body":"Uh, which is a $700,000 sale"},{"startTime":182.38,"endTime":187.69,"body":"price minus the $300,000 basis."},{"startTime":188.5,"endTime":192.64,"body":"Now, if you did do a 10 31 exchange,"},{"startTime":188.5,"endTime":192.64,"body":"you'd have no textbook income."},{"startTime":193.36,"endTime":197.35,"body":"Uh, let's say he bought a new"},{"startTime":193.36,"endTime":197.35,"body":"rom property for $700,000."},{"startTime":197.66,"endTime":200.21,"body":"Which in this case is a selling"},{"startTime":197.66,"endTime":200.21,"body":"price of your old property."},{"startTime":200.57,"endTime":203.78,"body":"Instead of being able to depreciate"},{"startTime":200.57,"endTime":203.78,"body":"the new property, starting at that"},{"startTime":203.78,"endTime":209.54,"body":"$700,000 purchase price, you'd have"},{"startTime":203.78,"endTime":209.54,"body":"to bring over the old basis from that"},{"startTime":209.54,"endTime":212.0,"body":"previous property, which was $300,000."},{"startTime":212.06,"endTime":217.46,"body":"So the game deferral really takes place"},{"startTime":212.06,"endTime":217.46,"body":"in the form of reduce depreciation"},{"startTime":217.46,"endTime":219.74,"body":"deductions on the new property purchase."},{"startTime":220.359,"endTime":220.75,"body":"Right?"},{"startTime":220.75,"endTime":223.84,"body":"So that's the immediate impact,"},{"startTime":220.75,"endTime":223.84,"body":"but what happens when they"},{"startTime":223.84,"endTime":225.43,"body":"sell the new rental property?"},{"startTime":226.335,"endTime":230.295,"body":"So for the sake of example, uh, let's"},{"startTime":226.335,"endTime":230.295,"body":"say that I sold the property shortly"},{"startTime":230.295,"endTime":234.375,"body":"after the 10 31 exchange for $750,000."},{"startTime":234.975,"endTime":239.445,"body":"If they just sold it without doing"},{"startTime":234.975,"endTime":239.445,"body":"another 10 31 exchange, then they"},{"startTime":239.445,"endTime":245.835,"body":"would have a taxable gain of $450,000,"},{"startTime":239.445,"endTime":245.835,"body":"uh, which is a sales price of 750"},{"startTime":245.895,"endTime":247.995,"body":"minus the reduced basis from the."},{"startTime":248.385,"endTime":250.785,"body":"Old rental property of 300,000."},{"startTime":251.325,"endTime":256.275,"body":"But what they could also do is just"},{"startTime":251.325,"endTime":256.275,"body":"do another 10 31 exchange and roll the"},{"startTime":256.275,"endTime":258.375,"body":"basis into yet another rental property."},{"startTime":258.704,"endTime":258.885,"body":"Hmm."},{"startTime":259.144,"endTime":259.805,"body":"That's interesting."},{"startTime":259.805,"endTime":263.555,"body":"So they could essentially keep doing"},{"startTime":259.805,"endTime":263.555,"body":"this over and over and have a property"},{"startTime":263.555,"endTime":267.425,"body":"where they were using the basis from a"},{"startTime":263.555,"endTime":267.425,"body":"property, you know, 10 exchanges ago."},{"startTime":268.235,"endTime":269.165,"body":"Yeah, pretty much."},{"startTime":269.835,"endTime":273.224,"body":"So, is there a circumstance where"},{"startTime":269.835,"endTime":273.224,"body":"someone wouldn't want to do a 10 31"},{"startTime":273.224,"endTime":274.635,"body":"exchange on their rental properties?"},{"startTime":275.645,"endTime":279.365,"body":"Yeah, there are a few, uh, one that"},{"startTime":275.645,"endTime":279.365,"body":"comes to mind is when the Varnell"},{"startTime":279.365,"endTime":283.385,"body":"property was the primary residence"},{"startTime":279.365,"endTime":283.385,"body":"of the taxpayer previously for"},{"startTime":283.385,"endTime":284.914,"body":"two out of the last five years."},{"startTime":285.275,"endTime":289.865,"body":"And that case it's usually"},{"startTime":285.275,"endTime":289.865,"body":"better to take the gain exclusion"},{"startTime":289.865,"endTime":290.655,"body":"that's offered under the."},{"startTime":290.835,"endTime":295.425,"body":"Code section one 20, one of your"},{"startTime":290.835,"endTime":295.425,"body":"personal residence up to 500,000."},{"startTime":295.815,"endTime":299.685,"body":"So you probably owe some tax on a"},{"startTime":295.815,"endTime":299.685,"body":"portion of the sale related to the"},{"startTime":299.685,"endTime":303.315,"body":"rental activity, but you'd be able"},{"startTime":299.685,"endTime":303.315,"body":"to bring the vast majority of the"},{"startTime":303.315,"endTime":305.955,"body":"money home on an after-tax basis."},{"startTime":305.955,"endTime":309.435,"body":"And wouldn't be held to the rigorous"},{"startTime":305.955,"endTime":309.435,"body":"requirement of the 10 31 exchange."},{"startTime":310.08,"endTime":310.469,"body":"Okay."},{"startTime":310.469,"endTime":311.94,"body":"So that's an important point here."},{"startTime":312.15,"endTime":316.71,"body":"You'd rather have gain exclusions"},{"startTime":312.15,"endTime":316.71,"body":"than a gain deferral in a 10"},{"startTime":316.71,"endTime":319.59,"body":"31, because the latter is mostly"},{"startTime":316.71,"endTime":319.59,"body":"just kicking the can down."},{"startTime":320.599,"endTime":320.99,"body":"Yes."},{"startTime":320.99,"endTime":321.89,"body":"100%."},{"startTime":322.55,"endTime":322.61,"body":"Yeah."},{"startTime":322.67,"endTime":322.82,"body":"Okay."},{"startTime":322.82,"endTime":326.63,"body":"So you mentioned that 10 31 exchanges"},{"startTime":322.82,"endTime":326.63,"body":"have some pretty strict or rigorous"},{"startTime":326.63,"endTime":328.159,"body":"as you phase it requirements."},{"startTime":328.49,"endTime":332.42,"body":"What exactly are the requirements of a"},{"startTime":328.49,"endTime":332.42,"body":"10 31 exchange to achieve tax deferral?"},{"startTime":333.375,"endTime":336.795,"body":"So these transactions have some strict"},{"startTime":333.375,"endTime":336.795,"body":"timelines that you need to adhere to."},{"startTime":337.065,"endTime":342.405,"body":"Uh, the first is a 45 day rule that"},{"startTime":337.065,"endTime":342.405,"body":"requires you to tell the 10 31 trustee"},{"startTime":342.765,"endTime":347.295,"body":"known as the intermediary, which"},{"startTime":342.765,"endTime":347.295,"body":"property you want to buy within 45"},{"startTime":347.295,"endTime":348.945,"body":"days of selling the old property."},{"startTime":349.455,"endTime":351.105,"body":"And then you must buy that property."},{"startTime":351.135,"endTime":356.505,"body":"Meaning closing escrow within 180 days"},{"startTime":351.135,"endTime":356.505,"body":"of the sale of the old rental property."},{"startTime":356.925,"endTime":360.675,"body":"Hmm, the IRS does love"},{"startTime":356.925,"endTime":360.675,"body":"time-based deadlines."},{"startTime":361.095,"endTime":363.885,"body":"So what else does the IRS"},{"startTime":361.095,"endTime":363.885,"body":"required for 10 31 exchanges?"},{"startTime":365.025,"endTime":369.725,"body":"Well, the property be like kind, which"},{"startTime":365.025,"endTime":369.725,"body":"in the way we've been talking about,"},{"startTime":369.935,"endTime":373.535,"body":"uh, means that it needs to be a rental"},{"startTime":369.935,"endTime":373.535,"body":"real estate for rental real estate."},{"startTime":373.955,"endTime":376.925,"body":"You can't exchange around real estate for."},{"startTime":377.039,"endTime":381.87,"body":"Uh, personal residence, um, title"},{"startTime":377.039,"endTime":381.87,"body":"myself to be held in the exact"},{"startTime":381.87,"endTime":385.05,"body":"same way in the new property"},{"startTime":381.87,"endTime":385.05,"body":"as it was in the old property."},{"startTime":385.56,"endTime":387.18,"body":"Uh, the replacement property."},{"startTime":387.63,"endTime":392.82,"body":"Or properties cannot exceed 200% of"},{"startTime":387.63,"endTime":392.82,"body":"the value of the previous property."},{"startTime":393.27,"endTime":397.98,"body":"Uh, and the new property can't"},{"startTime":393.27,"endTime":397.98,"body":"be less than 95% of the sales"},{"startTime":397.98,"endTime":399.24,"body":"price of the old property."},{"startTime":399.9,"endTime":403.83,"body":"Uh, and then when the purchase of the new"},{"startTime":399.9,"endTime":403.83,"body":"property, doesn't exactly equal the sales"},{"startTime":403.83,"endTime":407.61,"body":"price to the old property, there's some"},{"startTime":403.83,"endTime":407.61,"body":"potential for the part, uh, for part of"},{"startTime":407.61,"endTime":409.98,"body":"the transaction to be considered boot."},{"startTime":410.805,"endTime":415.215,"body":"Uh, yes, you always want to avoid"},{"startTime":410.805,"endTime":415.215,"body":"the boot, whether it's getting kicked"},{"startTime":415.215,"endTime":419.025,"body":"out of something, a boot on your car"},{"startTime":415.215,"endTime":419.025,"body":"for a parking violation, or in this"},{"startTime":419.025,"endTime":421.125,"body":"case, a boot in your ass from the IRS."},{"startTime":421.59,"endTime":425.01,"body":"So tell our listeners a"},{"startTime":421.59,"endTime":425.01,"body":"little bit about boot, right?"},{"startTime":425.01,"endTime":429.44,"body":"So taxable, uh, boots, a term"},{"startTime":425.01,"endTime":429.44,"body":"for cash or cash equivalent being"},{"startTime":429.44,"endTime":431.45,"body":"received from the 10 31 exchange."},{"startTime":431.81,"endTime":436.43,"body":"It could be actual cash or a reduced"},{"startTime":431.81,"endTime":436.43,"body":"mortgage amount and the new property"},{"startTime":436.43,"endTime":442.43,"body":"compared to the old, uh, either way,"},{"startTime":436.43,"endTime":442.43,"body":"if you receive boots as a result of the"},{"startTime":442.43,"endTime":444.2,"body":"exchange, you have to pay tax on it."},{"startTime":444.715,"endTime":448.225,"body":"Boom, Shaka Laka, John, very informative."},{"startTime":448.225,"endTime":451.585,"body":"And I think we just made it under the"},{"startTime":448.225,"endTime":451.585,"body":"five minute Mark to our listeners."},{"startTime":451.585,"endTime":454.855,"body":"If you have questions on 10 30,"},{"startTime":451.585,"endTime":454.855,"body":"one exchanges, or if you just need"},{"startTime":454.855,"endTime":458.215,"body":"a new CPA and you like what you're"},{"startTime":454.855,"endTime":458.215,"body":"hearing from John, you can email"},{"startTime":458.215,"endTime":461.725,"body":"him at John at dark horse dot CPA."},{"startTime":462.145,"endTime":467.365,"body":"And once again, that's John J"},{"startTime":462.145,"endTime":467.365,"body":"O H N at dark horse dot CPA."},{"startTime":467.785,"endTime":472.075,"body":"So as always, we'd like to thank you for"},{"startTime":467.785,"endTime":472.075,"body":"tuning into TMS, or if you're not into the"},{"startTime":472.075,"endTime":474.355,"body":"whole brevity thing, taxes made simple."},{"startTime":474.565,"endTime":477.145,"body":"Because there's TMI and then there's TMS."}]}