He would, however, need to list the replacement property within 45 days of the 180-
day exchange period [ CITATION Rup16 \l 1033 ].
We would also like to suggest that Mr. Jones itemize his deductions.
If he decides to
itemize his deductions, he can deduct his real estate and property taxes, mortgage interest,
miscellaneous expenses, etc.
If he decides to use the 1031 exchange that we suggested earlier,
Mr. Jones will have a large amount of property taxes.
There are, of course, limits to all of these
deductions.
Mr. Jones may have a home office.
To determine the deduction, multiple the square
footage of the home office, up to 300 square feet, by a fixed amount of $5, which is capped at
$1,500.
Mr. Jones should also dedicate a personal vehicle to be used for business only.
He then
could consider a deduction such as section 179, if he meets the requirements.
This would save
Mr. Jones some money on his taxes.
Charitable contributions could also reduce his taxable
income.
MEMO W/ APPENDIX
10
References
26 CFR 301.7701-1 - Classification of organizations for federal tax purposes.
(n.d.). Retrieved
from
26 CFR 301.7701-2 - Business entities; definitions.
(n.d.). Retrieved from
26 CFR 301.7701-3 - Classification of certain business entities.
(n.d.). Retrieved from
26 CFR 301.7701-4 - Trusts.
(n.d.). Retrieved from
26 U.S. Code § 1012-Trade or business expenses
. (n.d.). Retrieved from
26 U.S. Code § 1031 - Exchange of real property held for productive use or investment
. (n.d.).
Retrieved from
26 U.S. Code § 1221-Capital asset defined
. (n.d.). Retrieved from
26 U.S. Code § 170-Charitable, etc., contributions and gifts
. (n.d.). Retrieved from
26 U.S. Code § 446 - General rule for methods of accounting
. (n.d.). Retrieved from
26 U.S. Code § 448 - Limitation on use of cash method of accounting
. (n.d.). Retrieved from
Fitzpatrick, D. (n.d.).
How Sole Proprietors Are Taxed
. Retrieved from
Rupert, T. J., Pope, T. R., & Anderson, K. E. (2016).
Federal Taxation.
Prentice Hall.
Tax Guide for Small Business
. (2018, January 29). Retrieved from IRS:
Unlimited Liability
. (n.d.). Retrieved from Investopedia:
