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God will always provide |
I am shortly going to sell a apartment bld. I own. The amount of the sale over the original purchase price is going to be 70-80 k. What would be my best choice for a capital gains tax shelter and still get to utilize the money? | ||
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Member |
The best way is a 1031 Exchange. Then borrow 70-80k on the exchange. But if you just want out of the apartment owner business, you will have to find another way to decrease your liability. I am not sure what you could invest the excess funds in and still have access to the money. | |||
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| God will always provide |
I'm going to keep one of my rentals for tax write offs, but am getting out of the rest. It was fun when I was younger and could do my own repair and maintenance. But that time has passed, and getting decent workers to do an adequate job is becoming a rare thing indeed. | |||
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| Member |
TGS, not just good prices and stunning shipping times for gun leather and other things conservative but financial advice as well. Well done Top Gun Supply! | |||
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| Savor the limelight |
Edited because I gave wrong information. Consult a tax preparer or CPA.This message has been edited. Last edited by: trapper189, | |||
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| I believe in the principle of Due Process  |
Having been on every side of a 1031 there is, I'm not sure I can recommend them. I don't know of a way to postpone the tax and get the cash. I owned a 1031 accommodator for a few years. It was a sideline of sorts. I didn't handle that many files. It was subsidized by my other operations. It is surprising how a relatively simple duty causes so many such trouble. Commonwealth Title was rendered insolvent with its 1031 antics and ended up being taken over by Fidelity for a pittance, if that. A great many taxpayers got caught up in that and not only owed taxes but lost their properties and money. The only trouble I ever had was exchangers pestering me to cheat. There are strict time limits on replacement properties selection and closing times. This puts tremendous pressure to find, negotiate, do due diligence and close. That's when mistakes happen. When I did one, I ended up with replacement properties I very likely would not have purchased on the terms I did in a stand alone transaction. It becomes almost a suicide squeeze. It worked out mostly OK, but caused some anxieties I would rather have avoided. Given the pressures and risks, you might be better off to sell, pay the taxes and invest in something you can buy in confidence not under pressure. I have often thought that I may well have been. ETA: I have sometimes found that transactions done to avoid or reduce taxes, no other real goal, end up in grief, regret, anxiety, etc. Luckily, I have enough willpower to control the driving ambition that rages within me. When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson "Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown | |||
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| Smarter than the average bear |
I'm pretty sure this is not correct. It didn't sound right, and a little googling tells me that the only way long term capital gains are taxed at 0 is if your total taxable income (married filing jointly) is under $75,000. It's not that the first $75,000 of gain is taxed at 0%. Someone please correct me if I'm wrong. | |||
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| Member |
I can't disagree with this. All of these types of maneuvers can be aggravating and costly. I set up a reverse 1031 at one time that didn't work out within the timeline. I had to pay the recapture taxes as well as the tax attorney's fees to set up the failed exchange. Luckily, I was able to make another capital expenditure and use bonus depreciation in that same calendar year, so it was offset. And round and round it goes...It seems to me, you always end up eventually paying it, or at least some of it. | |||
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Member |
Don't forget that the depreciation will get recaptured, making the gain larger than the sell price minus the purchase price. Demand not that events should happen as you wish; but wish them to happen as they do happen, and you will go on well. -Epictetus | |||
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| Member |
My old accountant told me this years ago. Good advice today as well. | |||
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| Member |
I spose you could defer it till your dead. Then your heirs get a step up in basis. If you think regular 1031 exchanges are fun you should try a reverse exhange ( where you sell your property after you have purchase the exchange property) . I work for a bank that lends to the exchange entity and I have seen some real disasters if the back end property doesn't sell timely or for enough money. | |||
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| Just because you can, doesn't mean you should |
This and talk to a CPA first. ___________________________ Avoid buying ChiCom/CCP products whenever possible. | |||
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Character, above all else |
JALLEN, I remember you writing similar cautionary words in previous threads over the last year, so I sweated throughout the entire 1031 Exchange I just completed in February. Thanks to you I did my research, educated myself and exercised due diligence... and everything happened just as expected and all parties were happy. The process wasn't, and doesn't have to be a bad experience, especially if you make the effort to identify replacement properties prior to engaging the process. Those timelines are only an issue if you don't make yourself aware of what's available until your property sells. (I know you know this JALLEN, but others reading this thread might not.) If you ever desire to deal with an honest Qualified Intermediary in Austin, I have one for you. "The Truth, when first uttered, is always considered heresy." | |||
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| I believe in the principle of Due Process |
I try not to be as dumb as I look. I am retired, and do no real estate deals these days. I made the decision to liquidate as best I could several years ago, and move into securities exclusively. We own our home, nothing else. I have exposure (I hate that term!) to RE in REITs. Boy is that easy! I played a role in many thousands of escrows over ~40 years. There are enough "moving parts" in most situations that getting closed by fixed deadlines scares me to death, especially if there are lenders to be paid or to fund involved. Maybe I'm just old and no longer willing to leap to the challenges, would rather avoid problems than solve them. Luckily, I have enough willpower to control the driving ambition that rages within me. When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson "Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown | |||
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His Royal Hiney |
I do my own taxes, my own financial planning, my own investing. Having said that, with 70-80k wouldn't it be prudent to engage the services of a CPA on this issue who specializes in these sort of things? "It did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual." Viktor Frankl, Man's Search for Meaning, 1946. | |||
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| His Royal Hiney |
Or having made a lot of sausages yourself and seeing as how they're made, you prefer not to eat them these days. I can see how having seen the many ways things can go wrong, you can get paranoid about it and not worth the stress. "It did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual." Viktor Frankl, Man's Search for Meaning, 1946. | |||
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Member |
++1 Place your clothes and weapons where you can find them in the dark. “If in winning a race, you lose the respect of your fellow competitors, then you have won nothing” - Paul Elvstrom "The Great Dane" 1928 - 2016 | |||
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| Savor the limelight |
You are right and I am wrong. I've edited my first post and I'm sorry for any confusion I've caused. We have a modest amount of ordinary income on our return which our deductions and exemptions offset. The result of which is all of our taxable income is long term capital gains taxed at 0%. | |||
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| God will always provide |
Thanks, I was not aware of that. I have a call into my CPA who does my taxes. Also, thanks to all who contributed. It was and is appreciated.  | |||
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| I believe in the principle of Due Process |
In most ordinary transactions, closing times are, or can be flexible. If the closing date approaches and some lender hasn't responded or an appraisal has to be redone, or some title objection cleared up, it's not a big deal, usually. In a 1031 deferred exchange, the tax payer has a certain number of days within which to designate the replacement property, and a certain time period within which to close and complete the acquisition of the replacement property. If the deadline is missed, the exchange is blown, losing the tax deferment. That puts enormous pressure on all participants in the escrow, and an opportunity for strategic footdragging if need be. Having seen it from every different perspective, I'm not sure doing a 1031 is worth the complications. Luckily, I have enough willpower to control the driving ambition that rages within me. When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson "Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown | |||
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