1031 Exchange Taxes On Replacement Property Sale
If I did a1031 exchange with a property I have owned for 11 months now, and subsequently sell the replacement property in less than a year, would I have to pay short or long term capital gain taxes? Would it make a difference if I hold the relinquished property more than a year? Thanks for your responses.
Sell the replacement property with a holding period of one year or less and short term capital gains tax treatment applies if the sale is a taxable event.
More importantly, if you sell your original property in less than a year...you run the risk of your 1031 exchange being dissallowed by the IRS (I have heard).
Thanks for the responses.
If you had held the properties for the production of income, then it does not matter how many you sell. You are not a dealer as long as you are selling properties you have owned for awhile and have held for investment use.
If you are buying to flip, then you are a dealer for those transactions.
It is possible your accountant is leading you astray, but you did not really give us enough information behind your transactions to make a definitive determination..
Quote:....The tax is lower, 15% on the first $100k in profits as opposed personal tax rates Mantis,
Actually, the corporate tax on the first $100K in net profit is $22.5K. -- just slightly more that the $22331 you would pay in federal income taxes (in 2006) on the first $100K in taxable income when filing as a single taxpayer. The federal income tax bite is lower, only $18115, on the first $100K if the taxpayer is married and files a joint tax return.
My LLCs are all single member, so it sounds like everything will be treated as one entity for tax purposes.
Some of the answers were over my head, but I will take the time to dissect everything so it makes sense to me.
Thanks for your help[ Edited by ETA on Date 02/01/2006 ]
ETA,
In your situation, your income tax return is prepared as if the LLCs did not exist. Sale of your investment properties gets capital gains tax treatment and depreciation recapture applies. Your tax treatment does not change, even if you choose to liquidate all your investment property holdings in one year.
If your accountant tries ot tell you otherwise, get another opinion.
Your issues with LLCs are slowly being overcome by banks. The reason it has been so hard is that LLCs were not a common practice until the past decade. Some banks are updating their software and will then have the ability to finance in an LLC. Until then, your Quit Claim Deed is the best option to move ownership after the bank finances you.
Mantis:
If you are still reading this, I have a couple questions. First of all, what is your profession? I am just curious if you are a lawyer or asset manager because of your knowledge. Secondly, what is your take on Land Trusts? It is something that has commonly been used in Chicago and is now becoming more popular in Florida. This is the way some investors I have talked to are protecting their assets. One of the benefits they say is privacy since you can name a different Land Trust for each property making it hard to know how many your LLC has. Please enlighten us with your knowledge on this.
EstateXchange
The folks entering the info will let you claim whatever number you put on the W4. You do not have to justify.
Just fill out a new W4 and give to the HR dept
linin is correct. You can claim up to 10 dependants by filling out an updated W-4 as many times as you wish during the year. Choosing to claim greater than 10 dependants requires contact with the IRS using their forms.
Married or not , single, head of household or not all gets reconciled April 15 on your tax return. I could easily get additional money choosing another status. I answer these questions honestly. Work with other deductions creativlly to pay the least amount of taxes.
Hope this helps.