Quote:
On 2005-10-11 22:39, firemangtp wrote:
hmm,
The state taxes bring up an interesting point and another question....
I was a resident of florida when I bought the land (May) but a Georgia resident (since July) when I sold it. (in Oct)
Fl does not have stae taxes....Will I owe Ga state taxes on it now?
<font size=-1>[ Edited by firemangtp on Date 10/11/2005 ]</font>
Thanks for the help. I looked into it a little bit more...
I am supposed to be closing on the land today or tomorrow so it looks like I would have to decide to go 1031 and get the paperwork done asap. Then I would have to find another property to reinvest in in the next 3 months or get hit with the STCG anyway, (plus $750 charge for filing the 1031)
Good idea but probably not going to workout for us at such short notice, plus we kind of need the money anyway.
Im glad I looked into it though. Its good to know I can do this in the future.
Under a 1031 you would have 45 days to identify the replacement property(ies) and 180 days to close from the date of the sale of your land. It is not a big deal to initiate a 1031, but you need to do it before you close on the land.
I also hold several lots in SW Florida, so I am very interested in this topic.
I have been told by several sources that land that is held for resale is not eligible for a 1031 exchange...only land that is held for "investment income"--and then only if it is held for a "significant" period of time (estimates have ranged from 9 months to 2 years).
Did you lease the land out for hunting, or for camping, or for any purpose? Did you at least run an ad in the paper offering to rent out the land? If not, I have been told that your gain will not only fail to qualify for a 1031 exchange but you run the risk that this sale will be classified as a "dealer" sale. "Dealers" not only have to pay income tax on ALL gains (~33%?), but they also have to pay state taxes (~10% in California) and ALSO self-employed social security (~15%?). Thus, you could end up paying 58% on gains! So I have been told.
Can anyone comment on the accuracy of what I have been told?
The information that I have gotten from Qualified Intermediaries is that the the holding time is not the issue. It is the intent. I had a property for a few months before I wanted to unload it because of the neighborhood. I had intended to rent to the previous owners which never really occurred. the QI told me that it was OK to exchange it immediately since my intent was to rent it.
I have seen indications on the internet indicating that intent and not holding period is the current criteria for 1031 exchanges.
One of our resident authorities on 1031 exchanges is Bill Exeter (wexeter). Bill has been in the exchange business for quite a number of years. You might look up some of his posts or articles or perhaps he will chime in on this.
Regards,
Ed[ Edited by edmeyer on Date 10/11/2005 ]
hmm,
The state taxes bring up an interesting point and another question....
I was a resident of florida when I bought the land (May) but a Georgia resident (since July) when I sold it. (in Oct)
Fl does not have stae taxes....Will I owe Ga state taxes on it now? [ Edited by firemangtp on Date 10/11/2005 ]
Quote:
On 2005-10-11 22:39, firemangtp wrote:
hmm,
The state taxes bring up an interesting point and another question....
I was a resident of florida when I bought the land (May) but a Georgia resident (since July) when I sold it. (in Oct)
Fl does not have stae taxes....Will I owe Ga state taxes on it now?
[ Edited by firemangtp on Date 10/11/2005 ]
Yes, you will owe GA income tax. But you should double check with an accountant[ Edited by groverm on Date 10/11/2005 ]
Well its definately NOT a business. It was basicly just an investment property.
What if I file in my Federal and Fl income taxes in Fl and then file Ga taxes in Ga. ?
I definately need to get with a CPA I think.
Edit**
Just got me thinking... when our home in Fl sells, it will be exempt from capital gain taxes because we have lived there 2 of the last 5 years... but will we now have to pay any Ga state taxes since we live in Ga?
(oh God, please say No) This could seriously change our estimated income from the sale at 6%!!
Thanks again!
[ Edited by firemangtp on Date 10/11/2005 ]
[ Edited by firemangtp on Date 10/11/2005 ][ Edited by firemangtp on Date 10/11/2005 ]
The article says: Some policymakers and analysts are beginning to wonder whether such breaks are providing the wrong incentives, giving hefty deductions to millionaires buying Beverly Hills estates as well as to speculators snapping up Las Vegas ranch houses, hoping to turn a quick profit.
This suggests that real estate speculators -- those who are property flippers -- enjoy the same Home Mortgage Interest deduction afforded the owner-occupant homeowner. This is not so. The property flipper includes the mortgage interest paid on his flip property in the cost of goods sold on his Schedule C. Any proposed changes to the tax code that limit the Home Mortgage Interest deduction on Schedule A will not alter this tax treatment.
Furthermore, the 1997 tax code limited the home mortgage interest deduction to the first $1MM in acquisition debt. One has to wonder whether the millionaires buying Beverly Hills estates are actually getting a smaller mortgage interest deduction now than they were allowed under the pre-1997 rules.
Quote:
On 2005-10-11 22:39, firemangtp wrote:
hmm,
The state taxes bring up an interesting point and another question....
I was a resident of florida when I bought the land (May) but a Georgia resident (since July) when I sold it. (in Oct)
Fl does not have stae taxes....Will I owe Ga state taxes on it now?
<font size=-1>[ Edited by firemangtp on Date 10/11/2005 ]</font>
Yes, you will owe GA income tax.
Call a local NJ title company or the county assessor.
Nate,
the proceeds are ordinary income (dealer activity), and will be taxes as such an ordinary income.
I really appreciate your answer. Very helpful!
Nate
You could 1031 exchange into something else. There are lots of postings here on how to do that. Run a search.
Thanks for the help. I looked into it a little bit more...
I am supposed to be closing on the land today or tomorrow so it looks like I would have to decide to go 1031 and get the paperwork done asap. Then I would have to find another property to reinvest in in the next 3 months or get hit with the STCG anyway, (plus $750 charge for filing the 1031)
Good idea but probably not going to workout for us at such short notice, plus we kind of need the money anyway.
Im glad I looked into it though. Its good to know I can do this in the future.
Thanks again!
~Dan
Under a 1031 you would have 45 days to identify the replacement property(ies) and 180 days to close from the date of the sale of your land. It is not a big deal to initiate a 1031, but you need to do it before you close on the land.
I also hold several lots in SW Florida, so I am very interested in this topic.
I have been told by several sources that land that is held for resale is not eligible for a 1031 exchange...only land that is held for "investment income"--and then only if it is held for a "significant" period of time (estimates have ranged from 9 months to 2 years).
Did you lease the land out for hunting, or for camping, or for any purpose? Did you at least run an ad in the paper offering to rent out the land? If not, I have been told that your gain will not only fail to qualify for a 1031 exchange but you run the risk that this sale will be classified as a "dealer" sale. "Dealers" not only have to pay income tax on ALL gains (~33%?), but they also have to pay state taxes (~10% in California) and ALSO self-employed social security (~15%?). Thus, you could end up paying 58% on gains! So I have been told.
Can anyone comment on the accuracy of what I have been told?
venator64,
The information that I have gotten from Qualified Intermediaries is that the the holding time is not the issue. It is the intent. I had a property for a few months before I wanted to unload it because of the neighborhood. I had intended to rent to the previous owners which never really occurred. the QI told me that it was OK to exchange it immediately since my intent was to rent it.
I have seen indications on the internet indicating that intent and not holding period is the current criteria for 1031 exchanges.
One of our resident authorities on 1031 exchanges is Bill Exeter (wexeter). Bill has been in the exchange business for quite a number of years. You might look up some of his posts or articles or perhaps he will chime in on this.
Regards,
Ed[ Edited by edmeyer on Date 10/11/2005 ]
hmm,
The state taxes bring up an interesting point and another question....
I was a resident of florida when I bought the land (May) but a Georgia resident (since July) when I sold it. (in Oct)
Fl does not have stae taxes....Will I owe Ga state taxes on it now? [ Edited by firemangtp on Date 10/11/2005 ]
Quote:
On 2005-10-11 22:39, firemangtp wrote:
hmm,
The state taxes bring up an interesting point and another question....
I was a resident of florida when I bought the land (May) but a Georgia resident (since July) when I sold it. (in Oct)
Fl does not have stae taxes....Will I owe Ga state taxes on it now?
[ Edited by firemangtp on Date 10/11/2005 ]
Yes, you will owe GA income tax. But you should double check with an accountant[ Edited by groverm on Date 10/11/2005 ]
Man....
Thats a freaking easy way to loose 1100 bucks!
Well its definately NOT a business. It was basicly just an investment property.
What if I file in my Federal and Fl income taxes in Fl and then file Ga taxes in Ga. ?
I definately need to get with a CPA I think.
Edit**
Just got me thinking... when our home in Fl sells, it will be exempt from capital gain taxes because we have lived there 2 of the last 5 years... but will we now have to pay any Ga state taxes since we live in Ga?
(oh God, please say No) This could seriously change our estimated income from the sale at 6%!!
Thanks again!
[ Edited by firemangtp on Date 10/11/2005 ]
[ Edited by firemangtp on Date 10/11/2005 ][ Edited by firemangtp on Date 10/11/2005 ]
I have an issue with the article you cited.
The article says: Some policymakers and analysts are beginning to wonder whether such breaks are providing the wrong incentives, giving hefty deductions to millionaires buying Beverly Hills estates as well as to speculators snapping up Las Vegas ranch houses, hoping to turn a quick profit.
This suggests that real estate speculators -- those who are property flippers -- enjoy the same Home Mortgage Interest deduction afforded the owner-occupant homeowner. This is not so. The property flipper includes the mortgage interest paid on his flip property in the cost of goods sold on his Schedule C. Any proposed changes to the tax code that limit the Home Mortgage Interest deduction on Schedule A will not alter this tax treatment.
Furthermore, the 1997 tax code limited the home mortgage interest deduction to the first $1MM in acquisition debt. One has to wonder whether the millionaires buying Beverly Hills estates are actually getting a smaller mortgage interest deduction now than they were allowed under the pre-1997 rules.