Investment Sale/primary Residence
I am selling some land after 15 years of holding it and am facing some pretty serious taxes, it seems. The proceeds, after fees, commissions, etc, will be around $71,000. Less cost, about 55 in gain! I want to buy some more investment land, via a 1031 exchange, but also want to buy a home and stop renting. I want to give my son a cash gift as well. A tad of it, I just want to spend. How does all this break down as far as capital gains taxes? There's two sales, so I could 1031 some of it and home buy with the other, but does that help at all tax-wise? Thank you for any light you can shed on this issue, as I have closings coming up and MUST do the 1031 thing right away.
I'm not sure If OR is the same as MA, but when doing a 1031 exchange, you must use the money towards the same type of entity ie, single family for a singlefamily, multi for a multi. You may not be able to do a 1031 exchage. Your best bet is to see a good CPA accountant in your area, and he should have the break down for you
Actually, you can exchange it for any "like kind" property, which means any type of real estate. The important thing to remember is there are certain time frames that have to be met, i.e. you have 45 days to identify the property (or properties, if more than one) and you have to close on the identified property within 180 days of closing on the sold property.
I've got a contact in the 1031 business that can give you some free advice and will handle the exchange for as little as $450 but hesitate to give you info over the forum (for fear of breaking a rule).
There is a clause that must be placed in your contract prior to closing (an addendum will work fine) that would allow for the exchange.
You save taxes on the amount that you agree to place with the financial intermdiary (and are taxed on the portion that is left out). Let me know if you need a contact.
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Is there any way to get some of these funds into a residence, for instance, buy a duplex and live in part of it? Thanks for the info thus far. I may need that contact here soon!
The best way to do it, tax wise, would be to invest the entire sales amount into a multifamily/duplex/SFH and then rent that for a couple of years before you move into it.
Birddog1,
That is not correct. When you are completing a 1031 exchange ANY KIND of real estate is LIKE KIND to ANY OTHER TYPE of real estate provided both are held for either rental, investment or used in a business. The condo for a condo and single family for a single family is false information that has been spread for years.
You can always pull a little cash out at the close of your sale transaction as long as you realize that this will result in a small taxable event.
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Bill Exeter[ Edited by wexeter on Date 12/08/2004 ]
BlueFord is right on the money. You can sell your investment property, do a 1031 exchange, rent the acquired property for at least 12 months (or more to be a little more conservative) and then move into it and convert it into your primary residence. This is will accomplish everything. You can dispose of your property, defer your capital gain taxes, and ultimately live in your own home.
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