Capitol Gains Options
I am brandspanking new to this. My parents are first-time investors who stand to make 20 thousand on a rehab and flip. I just want to know the basic options that they have in the way of reducing their capital gains liability. They are open to reinvesting the profit. They will also be moving back overseas within a couple of months of the sale. This is an occupational move. Any advice is appreciated. Thanks[ Edited by bgood16 on Date 10/15/2003 ]
bgood16,
Here in the forum section, check out Taxes / Tax Strategies Forum. Here you will find information on the 1031 exchange. This may the the right vehicle for your parents investment!!!
Repoman
If your parents are set on flipping the property, their profit will be taxed at their ordinary income tax rate.
Holding the property for at least one year, will reduce their capital gains tax rate to 15%. If they place the property in service as a rental, they can take advantage of all the operating expense deductions and depreciation expense inherent in rental property ownership. These expenses could completely offset their rental income and they might be able to use the excess expenses to offset their ordinary income.
When your parents decide to sell their investment rental property, they could take advantage of a 1031 like-kind exchange to acquire a replacement investment property and defer the capital gains taxes.
Thanks Repoman and DaveT, for your time and advice. My parents just closed on the house, and I will be helping them with the rehab. If we do alright, it may be the beginning of a career for me. I like the idea of being my own boss, setting my own hours, and not having to answer to the Man. Thanks again, Bgood16
Two good reads are the following books by Robert Kiyosaki:
1. Rich Dad Poor Dad
2. Cashflow Quadrant
There is so much to learn after this but I would recommend starting there.