1031
I have a duplex that is closing on 0ct 7th paid 190k selling for 385k minus r.e com of 6% netting 358k-190k=168k. Can i pull that money and decide later in the 45 day period to 1031 it or do i have to at the time of close of escrow hand the money over to a qualified 1031 person. The reason I ask I have 30 day turn on a property where it could rock?
Was the property you are selling a rental real estate asset or one that you bought to flip?
How long have you owned the duplex? Did you live in it?
If you touch the money, you kill an exchange and that money is taxable. Get a qualified intermediary involved now.
Seller is doing it as a seller carry back.....To help with monies having to come to the table.
So, seller is giving you a second mortgage? This is part of his proceeds of the sale and is taxable income. The seller should look into installment sale tax treatment.
If your plan is to have the seller forgive the second, then the amount of the loan that is forgiven is taxable income to you.
First, be carefull on titles, you do not "get around" legal requirements you leagly restructure your affairs to delay or lesson regulatory or financial burdens.
Have you fully considered the tax effects if you just sold? Yes you would have to pay the 10% right away but would you qualify for it back by filing a return in the US? Depending on your country of residence and their tax laws you may find you would have the 10% withheld returned if you filed a US tax return. Look up the tax treaties in the US, if you are a resident of a country with a tax treaty with the US you may be able to lessen or eliminate US taxes on the transaction.
The easiest would be to delay the sale until you gain citizenship. Leasing it with an option to buy after say two years could be one way.
Another way might be to contribute the house to a Nevada LLC that elects to be taxed as a corporation. You would need to study this first as this would merely shift the tax burden to the corporation BUT the tax is only 15% on the first $50k of profit, not 10% of the entire amount. However, once you do this you introduce other problems. For example, you could not pay out any dividends to yourself without incurring an automatic 30% US Federal tax withholding amount, etc. This solution may be beneficial if you are certian of receiving US citizenship but may be worse if you do not become a US citizen.
You need to research your situation and options in greater detail before commiting to a course of action. You should also consider seeking advice from a tax attorney that serves non US investors investing in the US.
I dealt some with FIRPTA years ago when I sold real estate as a broker in Hawaii. There are a few exceptions. One is being a RESIDENT ALIEN is not a foreign person for FIRPTA purposes generally.
FIRPTA, the Foreign Investment in Real Property Tax Act, was enacted in 1980 and provides that if the Seller of real property is a foreign person, the Buyer must withhold a tax equal to 10% of the gross purchase price, unless an exemption applies. 26 U.S.C.A. § 1445(a). A foreign person is a nonresident alien individual; a foreign corporation not treated as a domestic corporation; or a foreign partnership, trust or estate. A resident alien is not considered a foreign person under FIRPTA.
link here but government has a link thru tax info somewhere also.http://www.aaronline.com/documents/firpta.aspx
His "commission" (share of the profits) would be a deduction for you from gross income. You would issue him a 1099-MISC.
This is one method ... there likely are others. Check with your tax advisor to determine the best course of action in your specific situation.[ Edited by fbprop on Date 10/11/2005 ]