Using Someone Elses Credit, How Do I Stop Them From Getting Capital Gains Tax
My dad is using his credit, and bought a house for me to rehab, when we sell the house, how can he not pay the capital gains tax becasue im getting all the profit. We already closed on the house but someone said put it in LLC and pay dividends but is there another way, is it possible to just write me a check for the profit, and send me a tax form for the money at end of year, i need help understanding this process can any help with a detailed (how to) so i know next time
thanks to anyone who can help
he is being generous he is only taking 10% I owe him big for the favor
Dad bought the property, right? You do all the work, fix it and sell it. When the property is sold, Dad will have taxes to pay on the profit. When Dad does his taxes, give him the amount of the additional taxes that he has to pay.
Let me recap: He bought it, he sold it (technically). If there is a profit of 20k and he has 6k in tax liability, pay him 6k in April when Dad does his taxes plus whatever else you are giving him for being a great Dad.
Next time just borrow the amount of the purchase, rehab and holding costs from Dad, and you do everything in your name.
Just have your Dad quit claim the property to you. When you turn around and sell it, only your name and SSN appear on the HUD-1 and only you get the 1099 showing the sale proceeds.
Your Dad has no capital gain impact., though it would be a nice gesture to repay him any money he put into the deal to get the project off the ground.
is the cost and fees of setting up and running a SDIRA worth it.
I have only found 1 trustee that I thought was reasonable.
Reasonable as opposed to paying taxes on the deal? You get to roll of the profit into the next profitable deal!!! Try the Entrust Group and tell them Marc sent you.
And you can COMPOUND your returns tax FREE!!!!!!!
Quote:
On 2007-12-21 12:36, michiganmoney wrote:
If the seller has to sue, he will have to sue the IRA and not you personally.
If the seller sues the IRA, the seller in actual practice sues IRA custodian. Your IRA agreement probably has a hold harmless clause which says that you agree to indemnify the custodian in case of a lawsuit.
Property taxes are an expense.
Chris
As a general rule, defer income and accelerate expenses. If you can pay an expense this year, you usually fair better with your taxes than if you pay next year.
As a general rule, any rehab/repair costs that you incurred to make the property ready to rent are capital expenses that are added to your cost basis and recovered through depreciattion. Download the IRS publication on Depreciation from the IRS web site.
From your question, I assume that your property taxes are assessed in arrears. That is you are being billed at the end of the year for the 2007 property taxes.
Since you purchased these properties this year, you need to look at your settlement statement to see how much credit you were given by the seller for property taxes. If you purchased in July, the seller has already paid half of the property tax bill in the form of a settlement credit against your closing costs.
Yes you will have to pay the full tax bill, but the amount you can expense against your rental income must be reduced by the amount you were credited at settlement.
Check the IRS web site and downloan the publicaction that deals with Rental Property Income and Expenses. This publication coupled with the Depreciation publication will address all your tax questions related to your rental property.
One of my mortgage servicing companies- I think it was Countrywide, or possibly GMAC- sent me a letter asking if I would prefer the escrow money to be used to pay the taxes before the end of the year or if I would rather they wait until they are due. So it appears that here in Michigan at least you have a choice.
Chris
We can hopefully take advantage to the lower than 15% brackets, as all of us are currently (intentionally) unemployed to do other things (travel, new business ventures, more school) AND to get into the lower gain brackets. The props being sold in 2008 should keep at least some of us in the lower brackets. 0% & 10%
If tax savings is less than 3%, why not just pay the taxes and divide the after tax proceeds. Seems a lot simpler if minimizing the income tax impact is your only concern.