Thanks for the feedback. So even with the weird situation where the land appraisal was higher than my total purchase price, I still need to allocate some value to the building? Would I need to get another appraisal specifically breaking down the components, or can I just make a reasonable allocation myself?

Yes, you definitely still need to allocate some value to the building. The IRS won't accept that a functional commercial building has zero value, regardless of the land appraisal. You don't necessarily need a new formal appraisal, but you should have some reasonable basis for your allocation. I'd recommend looking at the county tax assessment to see how they split land vs. improvements, or checking comparable properties in your area. Many CPAs recommend documenting your methodology in case of questions later. A 75/25 or 80/20 land-to-building split might be reasonable in your case, but have documentation to back it up.

So you're saying the IRS will tax you on depreciation you SHOULD HAVE taken even if you didn't actually get the tax benefit? That seems incredibly unfair. Is there any way around this if OP sells soon?

I've heard about DSTs but don't really understand how they're different from REITs? Are there minimum investment requirements? My financial advisor never mentioned these as an option.

DSTs are fundamentally different from REITs in both structure and tax treatment. Unlike REITs which are securities, DSTs are considered direct ownership in real estate for tax purposes, which qualifies them for 1031 exchanges. This means you can defer capital gains taxes by rolling proceeds from property sales into DSTs. Minimums typically start around $100,000, which is higher than REITs, but that's because they're designed for accredited investors. The tax benefits are substantial - you'll receive K-1s showing your portion of depreciation, which often shelters a significant portion of the cash distributions from immediate taxation. Many financial advisors aren't familiar with them because they require specialized knowledge and typically don't fit into standard model portfolios. You'll want to work with someone who specializes in tax-advantaged real estate strategies for high-income professionals.

I've invested in two Opportunity Zone funds. They do work as advertised tax-wise but be extremely careful about the underlying investments. Many OZ areas are economically distressed for good reason, and some developers are creating poor investments that only make sense because of the tax benefits. The best approach is to find OZ investments that would make sense even without the tax advantages. I found a multi-family development in an emerging area just outside a major city that had strong fundamentals regardless of the OZ benefits. The tax deferral and eventual exclusion is just a bonus.

That's really helpful insight. I was looking at a fund that invests in multiple OZ projects to spread the risk, but you're right that I should be evaluating the underlying economics first. What documentation do you need for tax purposes? My accountant mentioned something about attaching an election statement to my return and filing Form 8997 annually, but I want to make sure I don't miss anything that could jeopardize the tax benefits.

That's really interesting! I do have a small side business doing web design that brought in about $12,000 last year. Would I qualify for this SEP IRA option? And can I open one if I also have access to my employer's 401k from my main job?

Yes, you absolutely can set up a SEP IRA for your self-employment income, even while having access to an employer 401k! The two are independent of each other. The calculation gets a bit tricky though - it's not simply 25% of your gross $12,000. For self-employment income, you first need to deduct the self-employment tax deduction, then calculate 25% of that reduced amount. With $12,000 in net business income, you could probably contribute around $2,200-2,500 to a SEP IRA. That would directly reduce your taxable income for 2023 if you establish and fund the account before filing your taxes. Many brokerages like Vanguard, Fidelity, or Schwab offer SEP IRAs that you can open online pretty quickly.

The work-related educational expenses deduction was suspended until 2025, so that's unfortunately not an option for 2023 taxes. The moving expense deduction is indeed only for active duty military now too. But good call on the self-employed health insurance premiums! If OP has self-employment income as mentioned above, they might be able to deduct health insurance premiums paid.

Do you have to track personal miles separately? Or just know the total miles driven in a year and subtract business miles from that?

You need to track both. The IRS wants to see your total miles for the year (odometer readings) and your business miles specifically. The difference is your personal miles. They want documentation showing how you tracked this. Most audits of vehicle deductions focus on inadequate mileage logs. I recommend using a mileage tracking app that automatically logs your trips - much easier than trying to reconstruct it later.

Thanks for sharing your experience. I do expect to maintain high mileage (40-45k) annually for at least the next 3-4 years based on my current clients and service area. I'm leaning toward the standard mileage based on everyone's advice, especially since it seems to provide more flexibility if my situation changes.

Another thing to consider is how long you'll keep the vehicle. If you plan to sell/replace it in 2-3 years, Section 179 might be better. If you'll keep it 5+ years, mileage rate often works out better.

Interesting idea but isn't that overkill for what could just be a mistake? And would the IRS even care if the error results in people overpaying taxes rather than underpaying?

The IRS actually does care about systematic errors regardless of direction - their mandate is correct tax administration, not just collecting maximum revenue. Errors that cause overpayment can still trigger interest payments from the government and create unnecessary processing of amended returns. You might be right that it's overkill if this is truly just an isolated error. But based on the OP's description of being stonewalled for months despite acknowledgment of the error, I suspect this might be a more widespread issue. Brokerages have a legal obligation to report accurately, and the persistence of the problem suggests either incompetence or systemic issues in their reporting systems.

This is great insider knowledge - thank you! I'll definitely try the compliance department approach. Should I send this via certified mail or would email be sufficient? And is there specific language I should include to make sure it gets proper attention?

Certified mail with return receipt is best - it creates a paper trail that can be important if you need to escalate further. Email is okay as a follow-up but not as your primary communication. Use this language in your subject line: "FORMAL COMPLAINT: Regulatory Reporting Violation - Incorrect 1099 Tax Reporting." In the body, start with "This serves as a formal complaint regarding inaccurate tax reporting that violates IRS regulations for 1256 contract treatment." Then clearly outline the specific issue with your 1099, the dates you've attempted resolution, and names of people you've spoken with. Include a specific deadline (15 days is standard) and explicitly state that you will be filing regulatory complaints with FINRA, the SEC, and your state securities division if not resolved by that date. End with "I expect acknowledgment of this complaint within 3 business days.