Does the 3-property rule require you to buy all 3 properties, or can you just pick one of them? Sorry if that's a dumb question, I'm new to 1031 exchanges.

Not a dumb question at all! With the 3-property rule, you can identify up to three potential replacement properties, but you only need to actually purchase one of them to complete your exchange. The rule just gives you options. You could identify your neighbor's property as your first choice, and then add two other viable properties as backups. As long as you acquire at least one of those identified properties within the 180-day completion period, your exchange will be valid. This approach gives you the flexibility to target the property you really want while having fallback options.

Was it still worth doing the exchange even though you had to settle for a property you weren't excited about? Did the tax savings justify it?

The ID.me verification is actually why I couldn't get my transcript online! They couldn't verify my phone for some reason and I got stuck in this endless loop. Has anyone found a workaround for the ID.me verification issues?

The ID.me system can definitely be frustrating. If you're having trouble with the automated verification, try their "video chat verification" option. It lets you speak with a human representative who can manually verify your identity. It takes longer (sometimes there's a waiting room), but it usually works when the automated system fails. Another option is to use the login.gov pathway instead of ID.me if it gives you that choice. Some people have better luck with one system versus the other.

It's not just you! The tax system in the US is deliberately complicated because tax prep companies lobby to keep it that way. Many other countries have simple tax filing systems where the government pre-fills your forms and you just verify them. But companies like H&R Block and TurboTax literally spend millions lobbying to prevent simplification because it would hurt their business model.

I had no idea about the lobbying thing, but it makes total sense. I lived in Sweden for a few years and filing taxes there took like 5 minutes - they sent me a pre-filled form and I just confirmed it was correct by text message. Coming back to the US tax system was a huge shock. I'm definitely going to be more careful about saving copies of everything from now on. Lesson learned the hard way!

How much did that cost in legal fees though? Was it worth the hassle compared to just paying and moving on?

The attorney took 35% of what we recovered, but I didn't have to pay anything upfront. It was definitely worth it since I recovered about $8,500 after the attorney's cut, and I only had to participate in a couple of meetings and a deposition. The case never went to trial because the preparer's insurance company decided to settle once they saw the evidence. The whole process took about 6 months. Not a huge hassle considering the money recovered, and it felt good holding the preparer accountable.

Yes! Absolutely do this. My neighbor reported a bad preparer and it actually helped her case because the IRS was already investigating them for multiple issues. They were more willing to work with her on penalties.

Thanks for the suggestion about Form 14157! I hadn't even thought about reporting the preparer, but that makes total sense. I'll definitely do that. My CPA actually mentioned that they've seen other clients who used the same person with similar issues, so it seems like this person has a pattern of preparing inaccurate returns.

1 Thanks for the advice! I didn't even think about depreciation. Is that something I calculate myself or do I need an accountant? And are there any military-specific deductions I should know about with this setup?

10 Depreciation is actually pretty straightforward for residential rental property. The IRS lets you depreciate the building portion (not the land) over 27.5 years. You'll need to determine what portion of your purchase price was for the building vs. land - your property tax assessment often breaks this down, or you can use a reasonable estimate like 80% building/20% land in most areas. As for military-specific deductions, you can deduct unreimbursed moving expenses (still available for military even though civilians lost this deduction), and you may be able to exclude combat pay if applicable. If you paid state taxes in non-resident states where you were temporarily stationed, you might get credits for those in certain situations. I'd recommend talking to a military-experienced tax professional your first year with this setup.

24 I've tried several and had the best luck with FreeTaxUSA. It handles the Schedule E for rentals really well and asks all the right questions about military service. Plus it's way cheaper than TurboTax especially if you have rental income - TurboTax forces you into their premium version for that.

22 Thanks! I'll give FreeTaxUSA a try. TurboTax was charging me nearly $200 for the premium version plus state filing, which seems excessive considering we get free filing options through Military OneSource.

Does this work the same way if I use FreshBooks instead of QuickBooks? I find the asset tracking in FreshBooks a bit confusing for trade-ins.

FreshBooks handles fixed assets a bit differently than QuickBooks. In FreshBooks, you'll need to create a new expense for the full amount of the new laptop, then create a "credit" entry for the trade-in value. It's not as automated for calculating the remaining book value, so you'll need to know the remaining undepreciated value of your old laptop. If you're using FreshBooks, I'd recommend creating a simple spreadsheet on the side to track your fixed assets, their original purchase prices, accumulated depreciation, and current book values. This makes it much easier at tax time and ensures you're reporting everything correctly when you have trade-ins or sales of business equipment.

Thanks for the example! Did you handle this with regular depreciation or did you use Section 179 to expense the whole thing in the first year? Also, did you have to fill out any special forms for the "like-kind exchange" part?