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Posted by Francois Appert on April 19, 2007, 3:52 am
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Does the existance of capital gains from a Starker 1031 tax
free exchange trigger the Alternate Minimum Tax, even when
other capital gain losses exist to offset it?
Specifically: I own commercial real estate in Rhode Island
that I am planning to exchange for other residential
property this year using a 1031 tax free exchange. However,
there will be some boot left over from the commercial
property exchanged (i.e., just to make it clear, the
commercial property I'm exchanging is worth $2 million while
the residential property I'm acquiring is worth $1.5M,
leaving $500k left over in boot).
I have stock losses from the dot-com days to cover the boot
(in the above example, I have $600k in stock capital gain
long term carryover losses).
However, I've been told that even though I have long-term
capital gain losses, and by my reckoning will owe no tax,
the $500k boot will trigger the AMT, which requires a tax be
paid. Is this true?
By way of further clarification my income is just under the
AMT limit at the moment, but with the addition of the $500k
boot I will of course be over the limit. I am married with
dependants, if that matters.
A cite of the relevant code or a web link is ideal, but any
answers are appreciated, even without citation.
Thank you.
Francois Appert
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Posted by kastnna on April 19, 2007, 8:11 pm
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I think Capital Losses can be carried forward onto the AMT
calculation and you be able to offset your gain with your
past losses.
Regardless, have you considered putting the $500K in another
like-kind investment instead? A non-managerial, fractional
interest in a commercial property would provide an income
stream, diversify your real estate portfolio, and defer the
tax on the $500K. Of course the income from the rents
distributed to you would be taxable, but at least the
liability is more spread out. There are many trust companies
that specialize in 1031 exchanges to accomplish this goal.
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
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