For New York Accredited Investors Selling Investment Property in 2026
Defer Every Dollar of Capital Gains Tax Without Handing New York State a Check It Was Never Owed
New York investors face some of the highest combined capital gains tax rates in the country. A properly executed 1031 exchange defers all of it. An improperly executed one triggers the full bill, plus interest, plus the attention of one of the most aggressive state tax auditors in the nation. Breakwater guides accredited investors through every stage of their exchange, from sale strategy through closing day. Even if you already have a Manhattan attorney on the deal and assume the compliance side is covered.
As Featured In
The New York Problem
What Makes a 1031 Exchange in New York Different From Every Other State
The federal rules are the same everywhere. What makes New York dangerous is what sits on top of them.
The Tax Rate Stakes Are Among the Highest in the Country
On a $2M gain, combined federal and state taxes can exceed $900,000.
New York real estate investors face combined capital gains tax rates up to 10.9% at the state and city level, on top of federal rates approaching 37%. New York City residents face additional local income taxes ranging from 3.078% to 3.876%. A 1031 exchange defers all of it. A failed exchange pays all of it.
The Nonresident Withholding Trap
File the wrong form and withholding triggers automatically at closing.
Non-resident sellers of New York property must comply with Form IT-2663 for residential property or Form IT-2664 for non-residential property. Non-residents must withhold 7.7% of the gain on the sale unless an exemption applies. That exemption requires correct filing before the deed can be recorded.
The Transfer Tax and Mansion Tax Cannot Be Deferred
These taxes must be paid at transaction time and cannot be deferred through a 1031.
New York State imposes a transfer tax of 0.4%, and New York City imposes an additional transfer tax ranging from 1% to 2.625% depending on property type and value. Residential properties selling for $1 million or more are subject to a mansion tax with rates ranging from 1% to 3.9%. Many investors discover this only at closing.
The Department of Taxation Actively Audits 1031 Exchanges
New York scrutinizes closing statements and refinances around exchanges.
The Department of Taxation frequently scrutinizes closing statements and other financial records to uncover inconsistencies and unreported income, particularly in reverse and build-to-suit exchanges. New York has audited refinances before and after 1031 exchanges, often using Schedule L from Forms 1120S and 1065 to identify non-compliant transactions.
These are not theoretical risks. They are the specific ways New York investors lose exchanges that were otherwise valid. Breakwater plans around all of them before your property closes.
The Solution
What a 1031 Advisor Who Understands New York Actually Does for You
Breakwater is not a DST sponsor. We are a dedicated 1031 exchange advisory firm. We work exclusively for the investor, not the sponsor, and our team has direct working knowledge of both the federal exchange rules and the New York-specific compliance requirements that sit on top of them.
Here is what that looks like in practice:
Pre-Sale Exchange Strategy
Map your requirements before the 45-day clock starts.
Get your debt and equity requirements mapped to a qualifying replacement property before your 45-day clock starts, even if your New York closing is still weeks away and you have not engaged a QI yet.
Nonresident Withholding Forms
Correct form filed before your deed is recorded.
Have the correct withholding form filed before your deed is recorded, even if you did not know there were two different forms or that filing the wrong one delays the entire closing.
Audit-Ready Documentation
Structured to withstand New York Department of Taxation scrutiny.
Have every step of your exchange structured and documented to withstand New York Department of Taxation scrutiny, even if this is the largest transaction of your life and you have never been through a state-level audit review.
Get Your Exchange Right in Three Steps
Start Your Free New York Exchange Analysis
Same-day inventory match with residency status confirmed.
Tell us where you are in your transaction. Sold, under contract, or still planning. We review your debt and equity position, confirm your residency status for withholding purposes, and match you to available inventory the same day.
We Build Your Replacement Shortlist
Pre-screened DSTs matched with correct withholding forms coordinated.
Before your 45-day clock starts, we identify pre-screened DSTs that match your exact deferral requirements, confirm whether you need Form IT-2663 or IT-2664, and coordinate with your CPA and QI so nothing falls through at recording.
Close With Everything Handled
Audit-ready documentation for New York's Department of Taxation.
From nonresident withholding form coordination to audit-ready documentation structured for New York's Department of Taxation, we manage every compliance obligation through the finish line. You close clean.
No obligation. No cost to review your situation.
What You Get Access To
Institutional-Grade Replacement Properties Matched to Your Exchange
Each offering includes full due diligence documentation, debt and equity specifications, and projected cash flow. Everything you need to make a confident identification before your clock expires.
Passco Riverside DST
Sponsor: Passco Companies, LLC
ERP 1031 Industrial Portfolio IV DST
Sponsor: Energy Related Properties (ERP)
Why Not Go Direct?
Advisory-Led vs. Direct-to-Sponsor: What You Are Actually Choosing Between
Inventory
Direct-to-Sponsor
Limited to what that sponsor sells.
Advisory-Led (Breakwater)
Full marketplace across all sectors.
NY Withholding Forms
Direct-to-Sponsor
Your responsibility.
Advisory-Led (Breakwater)
Coordinated and verified before closing.
Audit Documentation
Direct-to-Sponsor
Your responsibility.
Advisory-Led (Breakwater)
Structured for NY Department of Taxation scrutiny.
Debt/Equity Matching
Direct-to-Sponsor
Your responsibility.
Advisory-Led (Breakwater)
Handled and verified before identification.
Deadline Management
Direct-to-Sponsor
Your responsibility.
Advisory-Led (Breakwater)
Fully coordinated 45/180-day tracking.
CPA/QI Coordination
Direct-to-Sponsor
Your responsibility.
Advisory-Led (Breakwater)
Included. We manage the relationships.
Sponsor Alignment
Direct-to-Sponsor
Works for the sponsor.
Advisory-Led (Breakwater)
Works for you.
| Feature | Direct-to-Sponsor | Advisory-Led (Breakwater) |
|---|---|---|
| Inventory | Limited to what that sponsor sells. | Full marketplace across all sectors. |
| NY Withholding Forms | Your responsibility. | Coordinated and verified before closing. |
| Audit Documentation | Your responsibility. | Structured for NY Department of Taxation scrutiny. |
| Debt/Equity Matching | Your responsibility. | Handled and verified before identification. |
| Deadline Management | Your responsibility. | Fully coordinated 45/180-day tracking. |
| CPA/QI Coordination | Your responsibility. | Included. We manage the relationships. |
| Sponsor Alignment | Works for the sponsor. | Works for you. |
Going direct costs less upfront. A failed exchange in New York, at combined rates over 40%, costs far more.
The Rules
Before You Sell, Know All of These
A 1031 Exchange can protect hundreds of thousands in equity. In New York, there are more ways to lose that protection than most investors realize.
Qualified Intermediary Required
You cannot receive or control the sale proceeds at any point. A QI must be engaged before your relinquished property closes. Do it after and your exchange is disqualified before it begins.
The 45-Day Identification Window
From the day of sale, you have exactly 45 calendar days to identify replacement properties in writing. The IRS offers no extensions and no exceptions, regardless of circumstance.
The 180-Day Closing Rule
Your replacement property must close within 180 days of your sale date. Miss this deadline and the full capital gain becomes taxable immediately.
Nonresident Withholding Forms
If you are a nonresident selling New York property, you must file Form IT-2663 for residential property or Form IT-2664 for non-residential property before the deed can be recorded. A deed cannot be recorded unless it is accompanied by a receipt showing the estimated tax has been paid or a certification that the withholding requirement does not apply. For a 1031 exchange, the exemption must be properly claimed on the correct form before closing.
Transfer Taxes Are Due at Closing Regardless
The New York State transfer tax, New York City transfer tax, and mansion tax on residential properties over $1M are all due at closing. They cannot be deferred through the exchange. They must be budgeted for separately and do not reduce your exchange proceeds.
New York Audits Exchanges Actively
New York's Department of Taxation scrutinizes closing statements, refinancing activity around exchanges, and entity structures. Improper documentation, a refinance taken too close to closing, or a misclassified entity type can each trigger an audit that unwinds an otherwise valid exchange.
Most New York investors know rules 1 through 3. Rules 4 through 6 are where exchanges quietly fail, and where Breakwater planning pays for itself.
Credibility
16+ Years. $1.1B+ In Exchanges Guided. Zero Sponsor Allegiances.
Breakwater Capital is a dedicated 1031 exchange advisory firm. We bridge the gap between selling a New York investment property and securing a tax-deferred legacy, for accredited investors who cannot afford to get it wrong.
Josh Chapin
President · 200+ Seminars on 1031 Exchanges
Josh has an extensive background in financial planning, specializing in unique investments and tax planning concepts. Since founding Breakwater Capital, he has developed deep expertise working with high-net-worth individuals and business owners — delivering thoughtful, personalized advice with a common-sense approach to complex strategies.
Series 7, Series 6, Series 63, Series 65, SIE, Life & Health
Supported by a Dedicated Exchange Team
Debbie Bannister
Certified Exchange Specialist · 18+ Years
Monique Wilson Kaiser
Senior Exchange Administrator · Since 1996
Naomi Booker-Abawag
Operations Manager
Taylor Pennington
Exchange Administrator · Since 2003
Experienced Advisory
Decades of collective experience in commercial real estate and tax-advantaged structures, including the specific compliance requirements New York places on exchange transactions.
Customized Portfolios
We specialize in scaling exchanges, splitting one large sale into multiple DST assets across sectors and geographies to meet your exact deferral requirements.
Client-First Philosophy
We work for you, not the sponsor. Our recommendations are built around your exchange, not around what is easiest to move.
As Featured In
Featured Offering
MCG Arden NC Multifamily DST
Sponsor: Madison Capital Group
A Class A garden-style community in a high-growth North Carolina submarket, with strong employment fundamentals and favorable supply dynamics.
Every week you wait to build a replacement shortlist is a week your 45-day window narrows. New York investors selling in Manhattan, Brooklyn, or Westchester are dealing with one of the most tax-aggressive states in the country at combined rates over 40%. A delayed start does not just cost you options. At those rates, it costs you the entire reason you are doing the exchange.
Two Ways to Get Started
Still planning your sale?
Request the Breakwater DST Overview. We will walk you through current inventory, show you how debt and equity matching works, flag your New York-specific filing requirements, and help you build a replacement shortlist before your property ever hits the market.
Already sold or closing soon?
Your 45-day clock may already be running. Call us directly and we will prioritize your file today.
Schedule a ConsultationNo obligation. No cost to review your exchange situation. If Breakwater is not the right fit for your transaction, we will tell you clearly and point you toward who is. You have nothing to lose by starting the conversation and potentially hundreds of thousands in combined New York and federal tax to lose by not starting it soon enough.
© Copyright 2025. All rights reserved.
IMPORTANT: Our Intent Is Not To Sell Nor Does Our Website Or Content Be Considered An "Offer To Sell" Securities. The Content On Our Website Is Education Purpose Only. Please Consult With An Attorney Or Your Local CPA To Determine If The Securities And Strategies Are Best For You And Determine The Tax Or Legal Consequences Of Any Particular Investment Or Strategy. Any Investment Or Strategy Involves Risk.
Legal Disclaimer
Privacy PolicyThe contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the "PPM") which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by an issuer, or any affiliate, or partner thereof ("Issuer"). All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM. With respect to any "targeted" goals and performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. These "targeted" factors are based upon reasonable assumptions more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment. These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified. Past performance are no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.
Securities offered through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC is not affiliated with any other entities identified in this communication.
1031 Risk Disclosure:
There is no guarantee that any strategy will be successful or achieve investment objectives; Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments; Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner's income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities; Potential for foreclosure – All financed real estate investments have potential for foreclosure; Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. The secondary market for these investments is very limited, and early sale is not guaranteed. Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions; Impact of fees/expenses – Costs associated with the transaction may impact investors' returns and may outweigh the tax benefits.
Real Estate Risk Disclosure:
There is no guarantee that any strategy will be successful or achieve investment objectives. Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments. Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner's income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. Potential for foreclosure – All financed real estate investments have potential for foreclosure. Illiquidity – These assets are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments. Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions. Impact of fees/expenses – Costs associated with the transaction may impact investor's returns and may outweigh the tax benefits. Stated tax benefits – Any stated tax benefits are not guaranteed and are subject to changes in the tax code. Speak to your tax professional prior to investing.
Opportunity Zone Disclosures:
Investing in opportunity zones is speculative. Opportunity zones are newly formed entities with no operating history. There is no assurance of investment return, property appreciation, or profits. The ability to resell the fund's underlying investment properties or businesses is not guaranteed. Investing in opportunity zone funds may involve a higher level of risk than investing in other established real estate offerings. Long-term investment. Opportunity zone funds have illiquid underlying investments that may not be easy to sell and the return of capital and realization of gains, if any, from an investment will generally occur only upon the partial or complete disposition or refinancing of such investments. Limited secondary market for redemption. Although secondary markets may provide a liquidity option in limited circumstances, the amount you will receive typically is discounted to current valuations. Difficult valuation assessment. The portfolio holdings in opportunity zone funds may be difficult to value because financial markets or exchanges do not usually quote or trade the holdings. As such, market prices for most of a fund's holdings will not be readily available. Capital call default consequences. Meeting capital calls to provide managers with the pledged capital is a contractual obligation of each investor. Failure to meet this requirement in a timely manner could elicit significant adverse consequences, including, without limitation, the forfeiture of your interest in the fund. Leverage. Opportunity zone funds may use leverage in connection with certain investments or participate in investments with highly leveraged capital structures. Leverage involves a high degree of financial risk and may increase the exposure of such investments to factors such as rising interest rates, downturns in the economy or deterioration in the condition of the assets underlying such investments. Unregistered investment. As with other unregistered investments, the regulatory protections of the Investment Company Act of 1940 are not available with unregistered securities. Regulation. It is possible, due to tax, regulatory, or investment decisions, that a fund, or its investors, are unable realize any tax benefits. You should evaluate the merits of the underlying investment and not solely invest in an opportunity zone fund for any potential tax advantage.