Cliff Notes
The Waterfall in One Page
The whole idea, who it fits and who it does not, on one sheet. Start here.
Free review draft · three editions
Your stuck passive losses are coupons with your name on them. They don't transfer.
Years of suspended rental and K-1 losses can sit on your return until the day you sell. The Waterfall Strategy shows how a Section 453 installment sale can release the gain in measured steps, so those losses meet it on better terms. And it shows, case by case, when it does not work at all.
Send me all three
Free. PDF. Full book, 20-minute version, one-page summary.
The idea in 30 seconds
Sell for cash and the gain arrives in one flood. The losses were waiting for a trickle.
One
The dam
Unless you qualify as a real estate professional, the passive activity rules hold rental and syndication losses back. They can only offset passive income.
Two
The reservoir
Year after year, the unused losses pile up on Form 8582. Some owners carry large balances of them for decades.
Three
The waterfall
An installment sale reports the gain as you are paid. Spread over years, the gain and the losses can meet in smaller, better-matched steps. Timing and bracket spreading, not magic.
What's inside
Written for owners. Built to be checked by their CPAs.
Stories first, then the numbers, then the code section. Every case has a "for your CPA" box with cites.
You can do everything in this book with seller financing, and the author would earn nothing. See the disclosures for how he is paid.
- 13
13 illustrative cases, including 3 where it fails
Landlords, LP investors, heirs and 1031 exchangers. Each case is a composite with a "what could go wrong" note, and three show the strategy losing.
- 3
The rate swap, in three lines
Why an unlocked loss can come off your highest-taxed income while the gain keeps its capital-gain rate, and the five layers of tax on a sale that decide whether it matters.
- 2
Two ways to do it, side by side
Seller financing and a structured installment sale, with the risks and costs of each. Plus 1031 boot, a 12-question checklist, and what to bring your CPA.
You get all three
Read the version that fits your patience.
The 20-minute version
The Waterfall
What your stuck real estate losses are waiting for. The impatient edition, stories and numbers.
Full edition
The Waterfall Strategy
How installment sales can put your stuck real estate losses to work. Every case, every cite, the technical appendix.
Straight answer
Who this is for, and who should skip it.
It's for you if
- You own rentals or syndication interests with stuck K-1 or rental losses, and you plan to sell.
- You are doing a 1031 exchange but taking some cash out, and the boot will be taxed.
- You inherited property with fresh depreciation, or your passive losses keep carrying forward.
- You are a CPA, EA or broker who advises sellers and wants the mechanics with cites.
Skip it if
- You are a real estate professional whose losses already offset your salary every year.
- Your losses are already being used against passive income.
- You need all the cash now, or your sale has already closed.
- You are planning to hold until death for the step-up in basis.
- It's dealer property: flips, inventory, buildings built to sell.
Free review draft
Get all three editions.
One form. The full book, the 20-minute version and the one-page summary, as PDFs. Corrections and pushback are welcome; it is a draft and it is written to be checked.