Please Help With Capital Gains Strategy!
i am about to sell an investment property. i will make about 40k on it, and cannot do at 1031 ex. because i haven't owned it a year. does anyone have any good ideas of how i can structure my personal/business finances to avoid having to pay gains on the whole amount? any advice would be appreciated. what would you do if you were in my position? personally, i make about 67k per year. i also run a real estate brokerage separate from my day job.
You need to consult a professional here. However my layman advise would be to structure the deal to allow you to spend your income before it is taxed.
We, as individuals, get taxed like this:
Income - taxes = left over to spend
Corporations, however, get taxed like this:
Income - expenses = taxed amount
You may need a new computer or need to take a vacation.
Definatly go talk to an accountant that specializes in taxes. There are not many people that are qualified to answer this question for you.
I would not write off the 1031 exchange that easily. The requirement is that the taxpayer have the INTENT to HOLD the property. The best way to prove or document your INTENT is to HOLD the property for one (1) year or more, but HOLDING it less than one (1) year does not automatically jeopardize your 1031 exchange transaction. I have submitted a article on the HOLDING REQUIREMENT to this web site, but until it is up you can view it here: http://www.diversifiedexchange.com/property_holding_period.asp. I would be happy to discuss this issue with you further if you like, just call me.
[addsig]
Bill is correct. If you don't have a paper trail showing an intent to sell the property right after acquiring it (listing agreements, advertisements for sale, etc.) -- in other words, nothing to telegraph an intent NOT to hold it for investment -- a 1031 is definately a possibility. If you purchased the property last year (2003), even better, since it will be reported as investment property on two tax returns - a useful documentation of intent.
There is no requirement that the property be held for a year or any other time frame, just that your intent was to hold it for business or investment purposes -- that is to say, not held for sale or personal use. And your tax savings would be even greater since it is a short term capital gain taxed at ordinary income rates.
There could be tax risks in NOT doing an exchange -- such as exposure to the Alternative Minimum Tax. Some tax advisors would say that the spectre of the AMT, as well as a big recognized gain (which may trigger IRS audit interest), is riskier than exchanging a property held for a relatively short time.
A chat with a competent tax advisor is in order!
Best of luck.
Bill is correct. If you don't have a paper trail showing an intent to sell the property right after acquiring it (listing agreements, advertisements for sale, etc.) -- in other words, nothing to telegraph an intent NOT to hold it for investment -- a 1031 is definately a possibility. If you purchased the property last year (2003), even better, since it will be reported as investment property on two tax returns - a useful documentation of intent.
There is no requirement that the property be held for a year or any other time frame, just that your intent was to hold it for business or investment purposes -- that is to say, not held for sale or personal use. And your tax savings would be even greater since it is a short term capital gain taxed at ordinary income rates.
There could be tax risks in NOT doing an exchange -- such as exposure to the Alternative Minimum Tax. Some tax advisors would say that the spectre of the AMT, as well as a big recognized gain (which may trigger IRS audit interest), is riskier than exchanging a property held for a relatively short time.
A chat with a competent tax advisor is in order!
Best of luck.