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Using a simple real-world example of a $700,000 fourplex purchased subject-to, Toby walks through how investors generate large depreciation losses on paper—and why those losses often can’t be used the way people expect.
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Most real estate gurus focus only on depreciation and cost segregation. But the IRS looks at subject-to transactions very differently, especially when the investor is not personally on the hook for the underlying debt.
Show Notes:
0:00 - Warning: the “subject-to wipes out W-2” claim
1:57 - The 3 tax gates: basis, at-risk, and passive loss rules
4:05 - The 3-lock vault: how the IRS tests losses
7:40 - Passive loss rules: when losses can offset income
8:13 - The 4 outcomes: passive income, no exception, active participation, REP status
12:35 - Suspended losses: what gets stuck under §465 and §469
15:08 - The subject-to guru problem: depreciation is not the whole game
17:18 - IRC §465: what “at risk” really means
20:12 - Why classic subject-to deals usually fail
23:57 - Best-case scenario on a typical subject-to deal
25:05 - The legal fix: how to increase your at-risk amount
29:23 - Subject-to do’s and don’ts
31:04 - Final takeaway
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ABOUT TOBY MATHIS
Toby Mathis, Esq. is the best-selling author of Infinity Investing: How the Rich Get Richer And How You Can Do The Same. Toby is a tax attorney and founded Anderson Business Advisors, one of the most successful law, tax, and estate planning companies in the United States. Learn more at
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The information provided in this video should not be construed or relied on as financial, investment, or legal advice for any specific fact or circumstance. Its content was prepared by Anderson Business Advisors with its main office at 3225 McLeod Drive Suite 100 Las Vegas, Nevada 89121. This video is designed for entertainment and information purposes only. Viewing this video does not create an attorney-client relationship with Anderson Business Advisors or any of its lawyers. You should not act or rely on any of the information contained herein without seeking professional legal advice.
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By: Toby Mathis Esq | Tax Planning & Asset Protection
Title: The Truth About Subject-To Deals and Tax Losses (The IRS RULE No One Explains)
Sourced From: www.youtube.com/watch?v=VDPjnN2nk1o
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