Section 1: What Makes Real Estate Taxation Unique

Unlike many industries, real estate is tied to both income tax and property-related regulations, making it unusually complex. Income must be reported carefully, deductions must be maximized legally, and long-term planning requires balancing current benefits with future liabilities.



Some of the biggest challenges include:

• Depreciation and write-offs that require precise calculation.
• Entity choices that influence liability and taxes for decades.
• Passive loss limitations that determine which expenses can be deducted.
• Capital gains rules that can strip away hard-earned profits if not managed.

Too often, investors rely on accountants who are unfamiliar with these intricacies, leaving opportunities untapped. Abraham Sanieoff emphasizes that treating real estate like any other business is a mistake—its financial rules demand specialized attention.

That’s why working with firms such as Presti & Naegele can make such a difference. They understand the nuances that separate basic compliance from full-scale optimization.

Section 2: Structuring Investments for Long-Term Advantage

When entering the real estate market, one of the first decisions investors must make is how to legally structure their holdings. This choice determines not just tax outcomes, but also liability protection and future flexibility.

Options include:

• LLCs: Popular for their mix of protection and pass-through taxation.
• Partnerships: Useful for shared ownership but require careful tax planning.
• Corporations: Rare but occasionally chosen for specific strategies.

The wrong structure can limit deductions, complicate financing, or create unnecessary risks. Conversely, the right setup allows investors to scale their portfolio with fewer complications.

According to Abraham Sanieoff:

“A solid entity structure is the foundation of any successful real estate strategy.” – Abraham Sanieoff

Presti & Naegele helps clients weigh these options, tailoring structures that balance protection with efficiency. By thinking beyond the immediate deal, they set investors up for long-term success.

Section 3: Maximizing Benefits Through Depreciation and Cost Segregation

Depreciation is one of the most powerful tax benefits in real estate, allowing investors to deduct the wear and tear of their properties over time. While most owners know they can depreciate buildings, fewer take advantage of advanced methods like cost segregation.

Cost segregation breaks down a property into smaller components—such as flooring, lighting, and fixtures—that can be depreciated over shorter timeframes. This accelerates deductions, putting more money in investors’ pockets in the early years.

For example, a $2 million commercial property might yield hundreds of thousands in front-loaded deductions if cost segregation is applied correctly. That cash flow can then be reinvested into new acquisitions.

As Abraham Sanieoff puts it:

“Depreciation isn’t just about reducing taxes—it’s about freeing up capital to reinvest and expand.” – Abraham Sanieoff

This is why Presti & Naegele incorporates cost segregation into their planning process. They ensure their clients aren’t just compliant with IRS rules, but also taking full advantage of every opportunity the tax code allows.

Section 4: Understanding Passive Activity Rules

The IRS draws a sharp line between active and passive activities, and this distinction can prevent many investors from using real estate losses to offset other income. Without a strategy, investors often find themselves sitting on deductions they can’t use.

However, exceptions exist. Investors who qualify as real estate professionals can classify losses as active, while others may use grouping elections or demonstrate material participation.

Abraham Sanieoff believes this is where many portfolios lose potential value:

“Too many investors leave money on the table because they don’t fully understand passive activity rules.” – Abraham Sanieoff

By working with specialists like Presti & Naegele, investors can document their involvement properly, qualify for available exceptions, and maximize their deductions.

Section 5: Reducing Taxes with 1031 Exchanges

Capital gains are unavoidable when selling properties—unless you know how to defer them. The 1031 exchange is a key strategy that allows investors to roll proceeds from one property into another without paying taxes immediately.

Here’s how it works: sell a property, reinvest the proceeds into a new “like-kind” property, and defer capital gains taxes until the next sale. This keeps more capital in play and accelerates wealth-building.

For instance, an investor selling a property for $1 million could roll the profits into a $1.3 million asset and defer all taxable gains, preserving capital for growth.

Abraham Sanieoff describes it as one of the most effective long-term strategies:

“1031 exchanges allow investors to keep their money working for them instead of giving it away to taxes.” – Abraham Sanieoff

But the rules are strict—deadlines must be met, and property identification rules must be followed. That’s why Presti & Naegele plays a crucial role in helping investors navigate these exchanges correctly.