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Posted by Daniel on March 19, 2007, 11:12 am
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I'm going to sell my triplex and will net 600k after selling
expenses. The basis is 400k so I'm looking at a 200k long
term gain and will get 200k at closing. I have never resided
at this property.
I will buy a duplex for 300k to replace it. Is there any
way to defer the (15% x 200k) tax on gain? I may reside at
this new property.
I am presuming that the tax bracket that determines your LT
cap gains rate is derived inclusive of the gain itself not
before it. Correct?
Thanks,
Daniel
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Posted by Paul Thomas, CPA on March 20, 2007, 1:47 am
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> I'm going to sell my triplex and will net 600k after selling
> expenses. The basis is 400k so I'm looking at a 200k long
> term gain and will get 200k at closing. I have never resided
> at this property.
>
> I will buy a duplex for 300k to replace it. Is there any
> way to defer the (15% x 200k) tax on gain? I may reside at
> this new property.
A Section 1031 "like-kind" exchage would need to be done for
the full sales price (closer to $600,000+) to defer the gain
on the sale.
There isn't any mechanisim to prorate the gains into a deferal.
NOTE: It may be possible to sell one unit (if it's been
condo'd) and defer that gain using a like-kind exchange for
the duplex half that will be rented. Talk to a 1031 expert
in your area to see if it's possible to do that.
--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net
<< ======================================================= >>
<< 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. >>
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<< 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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Posted by bono9763@yahoo.com on March 20, 2007, 1:47 am
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> I'm going to sell my triplex and will net 600k after selling
> expenses. The basis is 400k so I'm looking at a 200k long
> term gain and will get 200k at closing. I have never resided
> at this property.
>
> I will buy a duplex for 300k to replace it. Is there any
> way to defer the (15% x 200k) tax on gain? I may reside at
> this new property.
>
> I am presuming that the tax bracket that determines your LT
> cap gains rate is derived inclusive of the gain itself not
> before it. Correct?
Yes there is a way, but it must be carefully structured. You
can do a 1031 like-kind exchange when you sell your
property. But you must use an intermediary to facilitate
this. If you take possession of the money, even for a
minute, you will have to pay capital gains. Once you close
on the sale, you have 45 days to identify one or more
replacement properties and 120 days to close on the sale of
at least one of them. Then you must rent it out for a
resonable length of time. Most professionals advise at least
a year of renting. Then you can move into it and make it
your personal residence. If you live there at least two
years, you can then sell it and exclude up to $250,000 in
capital gains ($500,000 if MFJ). But you will have to
recapture any depreciation you took or could have taken
while renting it out.
If you decide to just pay the tax, your tax bracket includes
the income from the LTCG.
<< ======================================================= >>
<< 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 >>
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<< Copyright (2006) - All rights reserved. >>
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Posted by Bill on March 20, 2007, 1:47 am
Please log in for more thread options danielulmark@gmail.com (Daniel) posted:
> I'm going to sell my triplex and will net 600k
> after selling expenses. The basis is 400k so
> I'm looking at a 200k long term gain and will
> get 200k at closing. I have never resided at
> this property.
>
> I will buy a duplex for 300k to replace it. Is
> there any way to defer the (15% x 200k) tax
> on gain? I may reside at this new property.
>
> I am presuming that the tax bracket that
> determines your LT cap gains rate is derived
> inclusive of the gain itself not before it.
> Correct?
Not quite that simple. I presume your "triplex" was rented
out, during the time you owned it. That means depreciation,
so there will be more complications that a simple
subtraction of the cost basis (It's called "recapture.")
If the deal hasn't yet been completed, there is the option
to investigate a 1031 exchange -- for "like-kind" rental
property ... but that wouldn't fit your plans as described.
The maximum LT gain is 15% (though the recaptures will be
taxed at a higher rate).
I would recommend you consult a professional for a more
precise consideration of your options, before the closing.
Bill
<< ======================================================= >>
<< 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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Posted by Benjamin Yazersky CPA on March 20, 2007, 1:47 am
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> I'm going to sell my triplex and will net 600k after selling
> expenses. The basis is 400k so I'm looking at a 200k long
> term gain and will get 200k at closing. I have never resided
> at this property.
>
> I will buy a duplex for 300k to replace it. Is there any
> way to defer the (15% x 200k) tax on gain? I may reside at
> this new property.
>
> I am presuming that the tax bracket that determines your LT
> cap gains rate is derived inclusive of the gain itself not
> before it. Correct?
First of all, when you sell rental property, there will
likely be depreciation recapture taxed as ordinary income.
So, its not likely to be all LTCG.
One thing you may want to look into is a like kind exchange.
But, I don't know if you plan to live in the newly acquired
property if it would qualify for a like kind exchange. You
need to consult an expert in that field.
___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] >>>
-----> real address on hobokeni or hobokenx <-----
<< ======================================================= >>
<< 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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