One thing nobody's mentioned - if you haven't filed your 2023 taxes yet, you might want to request an extension to give yourself time to make sure everything is reported correctly. The 1031 reporting on Form 8824 can be pretty complicated when you have boot involved.

I'd strongly recommend getting a second opinion from a tax professional who specializes in 1031 exchanges before filing. While everyone here is correct that the boot is generally taxable in the year of sale, there can be some nuances depending on exactly how your exchange was structured. For example, if there were any complications with the original sale (like delayed closings or escrow issues) or if your QI agreement had specific language about when funds are considered "received," it might affect the timing. I've seen cases where the technical details of the exchange documents made a difference in how the IRS viewed the transaction. Given the significant tax bracket difference you mentioned between 2023 and 2024, it's worth investing in professional advice to make sure you're not missing any legitimate planning opportunities. A qualified tax attorney or CPA with 1031 experience should be able to review your specific documentation and confirm the proper reporting year.

As someone who's navigated similar compensation challenges, I'd suggest one additional strategy that's worked well for me: creating a "business case presentation" for your employee's compensation adjustment. Instead of just submitting requests through normal HR channels, prepare a formal presentation that you can deliver to key decision-makers. Include slides showing market data, ROI calculations from their contributions, risk analysis of losing them to competitors, and proposed compensation scenarios. I've found that when you present compensation adjustments as business decisions rather than employee requests, executives tend to be more receptive. Frame it as "retaining critical talent" and "preventing costly turnover" rather than "giving someone a raise." Schedule time with your VP or whoever has budget authority and present it like any other business proposal. Include cost-benefit analysis showing how much it would cost to replace this person (recruiting fees, training time, productivity loss, etc.) versus the cost of properly compensating them now. This approach has helped me secure out-of-cycle adjustments that seemed impossible through normal HR processes. It positions you as a strategic leader protecting company assets rather than just an advocate for your team member.

Just wanted to add another perspective as someone who went through a similar situation last year. After reading through all these great responses, I think you're absolutely making the right call to abandon the personal gift idea. One thing that really helped in my case was getting my employee involved in building their own compensation case. I worked with them to create a "career development plan" that included market research they conducted themselves, a portfolio of their achievements, and specific goals for the next 6-12 months. When we presented this to HR together, it showed that this wasn't just me advocating for someone, but a strategic employee who understood their own value and was committed to continued growth. HR was much more receptive to the request when they could see the employee had done their homework and wasn't just expecting a handout. The collaborative approach also helped my employee feel empowered rather than like they were dependent on my advocacy. They ended up getting a 20% salary adjustment and a promotion timeline that neither of us thought was possible through the normal channels. Sometimes the best way to help someone is to help them help themselves, especially when it comes to career advancement and compensation negotiations.

Just to add some clarity on the timing aspect - you mentioned the $6,700 Venmo transfer was in March, but you said it was $5k in your title. Which amount is correct? The exact amounts matter since you're close to the $18,000 annual exclusion limit. If it was actually $6,700 in March, then adding $17,500 from the joint account withdrawal would put you at $24,200 total - that's $6,200 over the annual limit that would need to be reported on Form 709. But if it was really $5,000 as mentioned in your title, then $5,000 + $17,500 = $22,500, which means $4,500 over the limit to report. Either way, you'd need to file the gift tax return, but the exact overage amount affects your lifetime exemption calculation. Just want to make sure you have the right numbers when you're planning this out!

Hey, I just want to chime in as someone who's been through a similar situation. The gift tax rules can definitely be confusing, especially when you're dealing with joint accounts and multiple transfer methods. From what I understand based on my own experience, the key things to remember are: 1. The $18,000 annual exclusion applies regardless of how you transfer the money (Venmo, bank transfer, cash, etc.) 2. For joint accounts, the gift occurs when your partner withdraws the money for her personal use, not when you deposit it 3. You'll need to be clear about the exact amounts - there's a discrepancy between your title ($5k) and post content ($6,700) for the Venmo transfer If you do exceed the $18,000 limit, don't stress too much. Filing Form 709 is mostly just paperwork - you likely won't owe any actual tax because of the lifetime exemption amount (over $13 million). The form just reduces your lifetime exemption by whatever you gift over the annual limit. My advice would be to document everything clearly - dates, amounts, purposes - especially for the joint account transfers. This will make things much easier if you need to file the gift tax return or if questions come up later. Good luck helping your girlfriend with those student loans! It's really sweet that you're in a position to help her out financially.

I've dealt with similar Section 754 valuation issues and want to emphasize the importance of timing your correction properly. Since you mention another building sale is pending, making the prior period adjustment before that sale closes would be ideal - it demonstrates the correction isn't driven by hindsight but by legitimate valuation concerns. One practical consideration: have you reviewed the partnership agreement to see if there are any provisions about how basis adjustments should be handled or allocated among partners? Some agreements have specific language about Section 754 elections that could affect your correction approach. Also, while the prior period adjustment through equity seems like the cleanest approach, consider whether your state has any specific requirements for partnership accounting changes. Some states require additional filings or notifications when partnership capital accounts are adjusted significantly. The $800,000 undervaluation you mentioned is substantial, so documenting your methodology thoroughly will be crucial. I'd suggest preparing a side-by-side comparison showing the original valuation method versus the corrected approach, along with supporting market data from 2022 that validates the higher valuation.

This is exactly the type of complex partnership tax situation where proper documentation and timing are critical. Based on what you've described, the prior period adjustment approach seems reasonable, especially since you have clear evidence from the recent sale that supports your position. A few additional considerations that might help: 1) **IRS precedent**: I've seen the IRS accept similar corrections when there's clear evidence that the original valuation was based on incomplete information (like below-market rents). The key is showing this wasn't a "change of mind" but a correction of factual errors. 2) **Partnership allocation impact**: Make sure to model how this adjustment affects each partner's capital accounts and future allocations. The nephews will benefit from the higher basis, but you want to ensure it doesn't create any unintended consequences for profit-sharing ratios. 3) **Audit protection**: Given the size of this adjustment, consider whether it makes sense to request a private letter ruling from the IRS to get explicit approval for your correction method. It's more expensive but provides certainty. 4) **Future sales**: Since you mention multiple properties in the partnership, establishing a clear precedent for how these corrections should be handled will be valuable for any future sales. The partnership agreement language you mentioned about "fair market value at the time of the triggering event" is actually quite helpful - it essentially mandates that you make this correction to comply with the agreement terms. Have you considered whether any of the other properties in the partnership might have similar valuation issues that should be addressed at the same time?

Don't forget to also check with your employer about their specific policies! My company actually grosses up my pay to cover the extra taxes I have to pay on my domestic partner's health benefits. It's not required by law, but some employers do this as an extra benefit to create equality between married and unmarried couples. Might be worth asking your HR if they have a policy like this - could save you hundreds in taxes!

This is exactly why I wish more people knew about these tax implications before signing up for domestic partner benefits! The $375 imputed income you're seeing is pretty typical - it represents the fair market value of the health insurance coverage for your partner and her son that the IRS considers taxable income to you. One thing to keep in mind is that this amount might change throughout the year based on your employer's insurance costs. Also, make sure your payroll department is calculating this correctly - I've seen cases where they include coverage that shouldn't be taxable (like certain wellness benefits) or use the wrong valuation method. Since you're getting married in August, definitely give HR a heads up a few weeks before your wedding so they can process the change quickly. The sooner you can get your marriage certificate to them, the sooner that imputed income will stop appearing on your paystubs. Congratulations on the engagement, by the way!