Pre Construction Flip....advice On Capital Gains Tax
Hi everyone. We are new to the site.
Is there anyway to lower and/ or avoid capital gains tax in the following scenerio: We have put 10,000 down on a 266K condo. The values have increased and they are now selling for around 316K and are still being built. Assuming we sell and lose the realtor fee, we will have made around 40K.
-Any chance of lowering our tax on the 40K?
-My understanding is that we will pay regular income tax rate on this money.
-Will forming an LLC help offset the taxes in anyway?
Thanks for your help and any advice.
Aaron
Tucson, AZ
[ Edited by jaj5836 on Date 08/22/2005 ][ Edited by jaj5836 on Date 08/22/2005 ]
Your income tax will be the same with or without an LLC. As a general rule, when you flip property, your profit is taxed as ordinary self-employment income.
what are your plans for the 40,000?????????? re-investing on another property ? if yes make sure you are within the time limits. Talk to an accountant or the Attorney that will assist you with the closing of your Sale, or if you have lived in the condo for 2 years then it is considered your residence and you do not pay this tax.
Thanks for the info.
We have not lived in the property. In fact, ground has barely been broken. The development is now sold out.
We have the opportunity to resell because we were in phase one and one of the first to put down our deposit.
We are looking to make a quick buck, but also wondering if there are any advanced strategies to avoid maximum tax??
Any suggestions would help.
Thanks
Aaron
To add to the question, because i have a relative in the same senario, what type of taxes will be assesed? Capitol gains tax and income tax? and at what rate for Capitol gains if sold within a year?
Are there any tax advantages to forming an LLC or S-Corp for a flip?
[addsig]
Are there any tax advantages to forming an LLC or S-Corp for a flip?
[addsig]
I stand by my original response.
As a general rule, when you flip property, your profit is taxed as ordinary self-employment income. Capital gains tax treatment does not apply.