Aggressive Tax Avoidance for Real Estate Investors, 1994 Edition
By John T. Reed
Reed Publishing Co., Danville, Calif., 1994, 241 pages, $23.95
Each year about this time, I look forward to reading the annual new edition of John T. Reed’s outstanding tax book for real estate investors.
This year’s updated issue is especially important because it includes the “1993 Clinton Tax Law,” officially known as the Revenue Reconciliation Act of 1993.
Reed says Ronald Reagan’s Tax Reform Act of 1986 was the worst tax law ever for real estate investors. But he hastens to add Bill Clinton’s 1993 Tax Law was the best tax law for realty investors since 1981.
Why? Reed emphasizes the new law allows owners to again deduct their tax losses from realty investments if they materially participate about 10 hours per week in real estate. And they now get another big tax break if their lender reduces the mortgage balance due to economic conditions. His book also explains other new tax breaks for investors.
What I like about Reed’s writing is he not only explains the tax law, often emphasizing the hidden tax saving benefits, but he emphasizes the practical applications to investment situations.
For example, he shows investors how to use first-year expensing of personal property purchases used in their investments. How many investors even know of this perfectly legal tax-saving method?
What I don’t like about Reed’s writing is he often talks down to the humble, ignorant reader. For example, Chapter 9 begins, “As I told you in the previous chapter …”
This is a very personal book, often using the first person to explain techniques. Once you get used to Reed’s unique writing style, greatly improved from the earlier editions, the concise easy-to-understand explanations make more sense.
Chapter topics include: The Aggressive Philosophy, When You Acquire Property, Depreciation and the Rehab Tax Credit, Expenses, Dealer Property, Installment Sales, Passive Loss Limitations, and Exchanging. Incidentally, the book contains a list of real estate tax attorneys and Starker delayed exchange facilitators.
The author is on the taxpayer’s side. But he’s not one of those weirdos who advocates illegal tax schemes.
In fact, a few years ago Reed was the subject of an intense IRS tax audit challenging every item on his complex tax returns. He passed with no changes.
Reed says, “Remember that an audit is a negotiation, not a trial where you have to prove your innocence. The auditor has the power to send you a deficiency letter. You have the power to take the IRS to Tax Court.”
On my scale of 1 to 10, this outstanding book rates a solid 10. Every real estate investor and realty agent should own and carefully study their personal copy.
