Ep. 71 — Brian Forcier: Defer the Capital Gains Hit When You Sell the Building

5 min read

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Episode Summary

You spent thirty years building the business, the building underneath it has been fully depreciated, and when the offer comes in you realize half the sale price is going to the IRS before you ever see it. That’s the moment most owner-operators learn about the 1031 exchange. Usually too late. I brought Brian Forcier on to walk through how this actually works, because almost every owner I talk to has the operating entity plus a building in a separate LLC, and the building is where the tax surprise lives. We got into the mechanics (45 days to identify, 180 days to close, the three-property rule), where it breaks (partnership entities that want to split up, accountants who’ve never done one), and why the real game isn’t just deferring tax. It’s converting a depreciated building into leveraged, cash-flowing replacement property that produces the retirement income the business used to produce. Brian closed with a story about a screen-printing couple who turned a $1.8M building sale into a $3M replacement property kicking off $150K a year, and a picture of their feet on a beach in Hawaii.

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## Top 10 Takeaways
  1. If your building is fully depreciated, selling it outright means paying tax on the entire sale price, not just the gain.
  2. Your operating entity and your building should already be in separate LLCs. That’s what makes a 1031 even possible.
  3. You have 45 days to identify replacement property and 180 days to close. Start the team before you list the building.
  4. The three-property rule covers 95% of exchanges: pick up to three replacement properties totaling the sale price or more.
  5. “Like-kind” is broader than owners think. Industrial can swap into multifamily, retail, or hospitality.
  6. Never tell the seller you’re in a 1031. They’ll price the negotiation around your deadline.
  7. The same entity that sells has to buy. Partnerships planning to split need to restructure a year and a day ahead.
  8. The real upside isn’t just deferral. It’s using bank leverage to turn $1M of equity into $4M of cash-flowing property.
  9. A good replacement property resets your depreciation basis, which can shelter the new cash flow from tax.
  10. If you can’t find the right replacement during the ID window, pay the tax. A bad asset is worse than a tax bill.

Sound Bites

“People always say, how soon should I look at planning for a 1031 exchange, and I say like today. Because if you don’t have the right team members and the right timeline in place, you’re going to pay taxes.” (@TBD) — Brian Forcier

“If we can’t find the right property during the ID period, I’m going to be the first one to tell you, don’t do this. Let’s pay the tax. It’s better to pay the tax than get yourself into a losing situation, especially in real estate when it’s illiquid.” (@TBD) — Brian Forcier

“The last thing you want to do is tell somebody you’re buying a piece of property from that you’re in a 1031 exchange situation. They know you have a certain amount of time or you’re going to pay tax, and they’re going to overcharge you because they know what you’re saving.” (@TBD) — Brian Forcier

“A lot of business owners have got call it half their wealth wrapped up into this business that’s been paying for their lease. Now they’ve got to take a million dollars and put it somewhere else.” (@TBD) — Ryan Tansom

About This Episode

Brian Forcier is a partner at Titanium Partners, a boutique commercial real estate firm that helps owners through the disposition, 1031 exchange, and acquisition of replacement property. He came up through property management in the late 90s, exited a single-family portfolio in 2004, and has spent the last fifteen-plus years on the investment side: industrial, multifamily, hospitality, retail, and office. He’s closed close to $800M in transactions and frequently sits alongside tax attorneys, CPAs, and bankers on owner-operator sales where the building is a major piece of the wealth. This episode sits in the iBD canon as a transaction-value conversation for owners with real estate inside or alongside their operating business.

Resources Mentioned

  • Titanium Partners — Brian’s firm. — titaniumpartnersllc.com
  • Brian Forcier — direct line — 218-590-8205 (text or call)
  • Brian Forcier — email — bforcier@titaniumpartnersllc.com
  • Todd Ganos / NING Trust episode — Referenced for Nevada trust strategies that pair with 1031 planning
  • Delaware Statutory Trust (DST) — Mentioned as another tool clients use alongside the 1031

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