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If you are an avid real estate investor who likes to keep rental properties for a reasonable period before selling, then there is a way for you to make $125K tax-free ove

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

r and above the rental income you receive. For this scenario, we will assume you are single simply because those that are married (even though you could double your tax-

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

free income potential) would not want to do what is required.

If you are a real estate investor and single, then you could incorporate a strategy that allows an extra ta

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

x-free income, up to $125K annually, in addition to the rental income you receive already. This program takes time to set up, but you may already be in a position to get

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

it started. The only drawback is it requires you to move every 2 years, which is why it is likely that married couples do not want to do this, especially if you have ch

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

ldren.

How does it work?

It is actually very simple. You acquire a reasonable number of properties, you must have at least one rental property to make this work, but t

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

he more you have, the easier it will be to implement. The IRS allows for a capital gains exclusion for up to $250,000 in gains on the sale of a property if you are singl

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

e. The two main requirements are that you owned the property at least two out of the last five years (not a company), and that you personally lived in it at least two ou

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

t of the last five years.

The plan requires you to move every two years in order to meet the IRS guidelines for claiming the deduction prior to selling the property. Yo

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

u may even be able to get started by purchasing a new home to live in while renting your current residence for the next 3 years. Remember that the IRS does not specify w

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

en the 2 years must be, so it could be the first 2 years of the last 5 and you could still claim the exclusion.

Now that you know how it can be tax-free, what are the li

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

mitations?

We discussed some of the limitations regarding the exclusion, but there are some others that need to be discussed as well. Remember that the gains are from t

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

he difference between the tax basis you kept record of and the proceeds from the sale of the property. If you are like many investors, and you depreciated the property t

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

o save on taxes already, you will most likely still be required to pay the depreciation recapture tax on the depreciated amount. Also, there are some other tax related i

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

ssues for rental properties you will need to factor in, such as how repairs versus replacements work for taxes.

Can you sum this up for me?

Yes, here is the summary of

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

hat you can do to receive up to $125K annualized tax-free income while earning rental income as well. You purchase rental properties and earn the rental income while you

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

own them. Remember to maximize your tax deductions using proper techniques during the ownership, but you will have to weigh the benefits of depreciating the property.

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

While you earn this rental income, the property is likely appreciating in value (over time, not necessarily immediately), so in two years you could have a property that a

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

ppreciated up to $250K and you would be able to sell it and potentially receive that gain tax-free. The main requirement is that you move into one of your properties eve

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

ry two years. Married couples can theoretically double this income following the same strategy, but the requirement to move every two years may be too hard on the family

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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