I'm currently dealing with a Form 1045 situation myself and this thread has been incredibly helpful. Filed mine in August 2024 after a major business loss, so I'm about 5 months in now. Based on what I'm reading here, it sounds like I should expect at least another month or two before seeing any movement. The frustrating part is the complete lack of communication from the IRS - you just have to sit and wait with no updates. One question for those who've been through this: did any of you receive any kind of acknowledgment letter or notice that your Form 1045 was received and being processed? I sent mine certified mail but never got anything back confirming they actually have it in their system. Also curious if anyone tried checking the "Where's My Refund" tool online - does that even work for 1045 applications or is it only for regular tax returns?

I'm about 7 months into waiting for my Form 1045 processing after filing in September 2024. Reading through everyone's experiences here is both reassuring and frustrating - at least I know I'm not alone in this endless waiting game. One thing I learned the hard way is to make absolutely sure you include every single supporting document when you file. I initially forgot to include one of my K-1 schedules from a partnership loss, and when I realized the mistake a few weeks later, I had to send an amended 1045 which basically reset my processing clock back to zero. For anyone just starting this process, my advice would be to triple-check everything before mailing it in. Have someone else review your calculations and documentation because any missing piece can add months to an already lengthy process. Also, keep meticulous records of exactly what you sent and when. I created a checklist of every form, schedule, and supporting document, plus took photos of the complete package before sealing the envelope. If you end up having to call the IRS later, you'll need to be able to tell them exactly what was included in your original submission. The wait is excruciating, especially when it's a substantial refund, but based on what I'm seeing here, most people do eventually get their money. Just prepare yourself mentally for 6-8 months minimum.

Great discussion here! As someone who's dealt with similar capital gains situations, I wanted to add a perspective that might be helpful. While everyone's covered the main strategies well (1031 exchanges, Opportunity Zones, etc.), there's one angle worth considering given your real estate professional status: the timing of when you recognize income versus deductions across your various LLCs. Since you're not subject to passive activity limitations, you have more flexibility in managing the timing of income and deductions across your portfolio. If you're acquiring new properties, you could potentially accelerate certain deductible expenses (like repairs, improvements that don't qualify for capitalization, or professional services) into the same tax year as your capital gains recognition. Also, don't forget about the Section 199A QBI deduction - as a real estate professional, your rental activities should qualify for the 20% deduction, which can help offset some of the overall tax impact even if it doesn't directly reduce the capital gains. One last thought: if you do go the 1031 route, consider whether a reverse exchange might give you more flexibility. It's more complex but allows you to acquire the replacement property first, which can be advantageous in competitive markets where good properties move quickly. The key is running the numbers on all these strategies with your actual figures to see which combination gives you the best after-tax result.

This thread has been incredibly educational - thank you all for the detailed insights! As someone who's been wrestling with similar capital gains questions from my own multifamily sales, I wanted to share a couple of additional considerations that might be relevant. One thing I learned the hard way is to pay close attention to your depreciation recapture calculations when planning any of these strategies. While everyone's rightfully focused on the capital gains portion, the depreciation recapture (taxed as ordinary income up to 25%) can be substantial after owning a property for several years, especially if you've done cost segregation studies in the past. Also, for those considering the installment sale route that was mentioned earlier - be aware that depreciation recapture must be recognized in full in the year of sale, even with installment treatment. Only the capital gains portion can be spread over multiple years. This caught me off guard on my first installment sale. Given your real estate professional status and multiple LLC structure, you might also want to explore whether any of your properties qualify for the small business stock exclusion under Section 1202 if you've structured any of your LLCs as S-Corps. It's a long shot for real estate, but I've seen some creative structuring around property development activities. The consensus here seems solid though - 1031 exchange appears to be your best bet for the capital gains deferral, especially with your plans to continue investing in real estate.

What about cash expenses for business? I sometimes pay day laborers in cash for help with my landscaping business - how do I prove these are legitimate?

Great thread! As someone who went through my first business tax filing this year, I learned the hard way that organization is EVERYTHING. The IRS basically expects you to be able to prove every single deduction you claim. One thing that really helped me was setting up a simple system from day one: I use a dedicated business checking account, immediately photograph receipts with my phone, and keep a simple spreadsheet noting the business purpose of each expense. Even small purchases like office supplies get documented. The key insight I had is that the IRS isn't necessarily looking to catch you doing something wrong - they just want to see that you're being reasonable and keeping proper records. If you can show clear business purpose and have documentation to back it up, you're usually fine. For anyone just starting out like the original poster, my advice is to err on the side of over-documenting rather than under-documenting. It's way easier to establish good habits from the beginning than to try to reconstruct everything later if you get audited.

I went through this exact same situation last year with a $3,200 settlement from a data breach class action. The IRS initially tried to classify it as self-employment income, but I successfully challenged it. Here's what worked for me: I wrote a detailed response letter explaining that the settlement was compensation for damages related to a data breach, not payment for any services I provided. I emphasized that this was a one-time payment unrelated to any trade or business activity on my part. The key is to be very clear about the nature of the settlement. Since yours was from a class action (not related to your work or business), it should be reported as "other income" but definitely not subject to self-employment tax. Make sure to include the settlement letter you received and clearly state that you were a passive recipient of the settlement as an affected consumer, not someone providing services. Don't just pay the $362 - it's worth challenging this. The IRS automated system often incorrectly flags miscellaneous income without proper 1099s as potential self-employment income, but that doesn't mean they're right. You have a strong case for getting this reclassified properly.

I'm dealing with a very similar situation right now! Got a CP2000 notice for a $1,850 class action settlement from a credit monitoring service data breach. The IRS wants to treat it as self-employment income and hit me with an extra $261 in taxes. Reading through all these responses has been incredibly helpful - I had no idea that the IRS automated system just flags unreported miscellaneous income as potential SE income. It makes sense now why they're going after these settlements. I'm definitely going to challenge this based on what everyone is saying here. The settlement was clearly for a data breach where I was just an affected customer, not providing any services. I still have the original settlement letter that explains it was compensation for the company's failure to protect customer data. Has anyone had success specifically with credit monitoring/financial services data breach settlements? I want to make sure I'm using the right language in my response letter to the IRS.

I'm a tax professional and wanted to clarify a few important points about 1099-NEC forms for prizes that I see causing confusion in this thread. The 1099-NEC is absolutely the correct form for your situation. Any business that pays a non-employee $600+ must use this form, whether for services OR prizes/awards. The form name "Non-Employee Compensation" is misleading because it covers more than just contractor payments. For tax purposes, you have two main options for reporting this $6,500: 1. Schedule 1, Line 8 (Other Income) - RECOMMENDED for prizes/awards. You'll pay only regular income tax. 2. Schedule C (Business Income) - ONLY if you provided services to earn this "prize." You'd pay income tax PLUS 15.3% self-employment tax. Since this was clearly a workplace recognition prize (not payment for services), definitely use Schedule 1. The sponsoring company did everything correctly - this is standard practice for third-party prize providers. One last tip: Keep documentation showing this was a prize/award, not payment for work, in case the IRS ever questions the reporting method you chose.

I'm going through something very similar right now and this thread has been incredibly helpful! I received a 1099-NEC for a company retreat incentive prize (a $3,800 weekend getaway) and was panicking thinking I'd have to pay self-employment taxes on it. After reading all these responses, I feel much more confident about reporting it correctly on Schedule 1, Line 8 as "Other Income" rather than treating it like contractor work. It's such a relief to know that the 1099-NEC form itself doesn't automatically mean you owe self-employment tax - it's really about HOW you report the income that matters. I also appreciate the advice about keeping documentation. I have all the emails about the incentive program and the terms of the prize, so I'll definitely save those with my tax files in case there are ever any questions. Thanks to everyone who shared their experiences and knowledge - this community is amazing for helping navigate these confusing tax situations!