Client Profile

Client Name: Emily
Occupation: Sales
Combined Income: Over $1,000,000 annually

Primary Goals

- Reduce taxable income from W2 earnings
- Minimize taxes from the sale of her real estate portfolio
- Strategically manage large Bitcoin gains
- Preserve wealth and reinvest proceeds tax efficiently

The Tax Challenge: High Income and High Capital Gains Colliding

Emily is a top performing sales professional earning well above 1 million dollars per year. Recently she sold her rental property portfolio. At the same time she also realized substantial gains from Bitcoin. With no Real Estate Professional Status and no passive losses available every dollar of gain was about to hit her return at full force.

Between the W2 income the real estate gains and the crypto appreciation her projected tax liability skyrocketed.

Initial estimates revealed a capital gains tax bill of almost six hundred thousand dollars. Even for a high income earner that number was overwhelming.

Emily felt discouraged. She had spent years building and exiting her real estate portfolio yet the IRS was positioned to take a massive share of her profits. She needed a solution that was fast compliant and protected her wealth.

That is when she came to our team for guidance.

The Strategy: A Timely and IRS Compliant 1031 Exchange

To help Emily reduce her tax exposure and preserve her gains we executed a carefully structured 1031 Exchange. This allowed her to defer her real estate capital gains by reinvesting the proceeds into new investment properties.

It was the ideal solution. She did not qualify for REPS. She had no passive losses. And her gains were large enough that doing nothing would have resulted in an unnecessary tax hit.

Here is how we solved her problem.

1. Leveraging the 1031 Exchange to Defer Large Gains

The 1031 Exchange allowed Emily to roll the proceeds from the sale of her rental properties into new like kind investments. This deferred the capital gains tax and preserved more of her capital.

This mattered for several reasons:

She could not use depreciation or passive losses to offset gains
She would otherwise be taxed at the highest capital gains rate
A properly executed 1031 Exchange allows tax deferred compounding

We managed the strict timelines identifying replacement properties within forty five days and closing within one hundred eighty days ensuring full IRS compliance.

2. Coordinating Timing With Other Income Events

Because Emily also realized large Bitcoin gains timing became critical.

We ensured the 1031 Exchange aligned with:

The year her real estate sales occurred
The reporting of her crypto gains
The goal of avoiding taxable boot

This prevented layering multiple taxable events into the same year.

3. Wealth Preservation and Strategic Reinvestment

We helped Emily select replacement properties aligned with her long term goals. This allowed her to avoid rushing into poor deals simply to meet IRS deadlines.

This approach protected her cash flow and appreciation potential and created a foundation for future tax strategies.

The Results: Nearly Three Hundred Thousand Dollars Saved Immediately

By executing the plan precisely Emily achieved:

Capital gains tax reduced from about six hundred thousand dollars to about three hundred thousand dollars
A tax bill cut nearly in half
Full IRS compliance
Tax deferred reinvestment of real estate proceeds
Long term compounding on pre tax capital
A repeatable strategy for future transactions

Takeaway: High Income Earners Can Keep More of Their Gains With the Right Strategy

Emily’s experience shows what many high income professionals never realize.

Massive tax bills are not inevitable.

With proper planning you can:

Defer gains
Protect wealth
Reinvest strategically
Reduce tax exposure responsibly

A 1031 Exchange is one of the most powerful tools for long term wealth building but only when executed correctly.

Need Help Creating Your Own 1031 Capital Gains Strategy

Just like Emily you can protect your wealth and reduce your tax burden with a customized plan.

Book Your FREE Consultation Now

📞 Call Us Toll Free: +1 800 522 6091
📧 Email: clients@investorfriendlycpa.com

Related Study: See how a sales professional turned tax chaos into $105,000 in annual savings with the right structure.

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