Capital Gains
To whom it may concern,
Thank you for taking time to read this. My grandmother is the co-owner of a house (which she has not lived in). Also she owns a house, which is her place of residence (That she inherited from her father upon his death; and has a 50,000 dollar mortgage left to pay off). The other co-owner of the house wants to buy her out for about (175,000-200,000 dollars) after she signs the other half to him. Is there a way to defer or minimize the Capital Gains tax that will incur when she sells her half of the property? She wants to give some of her grandchildren money and keep the rest to live off of? What are her options? Thank you,
Sincerely,
Anthony O[ Edited by antoniusortega on Date 11/09/2004 ]
If your grandmother wants the money rather than more investment property, then she will have to pay the capital gains taxes.
An installment sale will spread out the tax payments but she will still have to pay all of her tax on the profits from the sale.
Fletch:
You have to hold it for two years to be tax exempt. This applies to up to $250k if single and $500k if married. If you sell it within the two year period, there is a chart they go by depending on the number of months owned what the tax is... Consult with your CPA.
Why not keept keep the first one as a rental, take some money out against it and buy the next one?? Food for thought!
Best Regards,
Jeff Adam
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"Capture Motivated Sellers Automatically"[ Edited by JeffreyAdam on Date 11/07/2004 ]
Sounds like you are talking about primary residence re 250 k & 500k ?
This is not that !!
As far as taking money out if the first, what would be the advantage ?
If the first has a mort of 285K and the 2nd is 450K, is there any advantage to make the first 385K and the 2nd 350k ?
Quote:
On 2004-11-07 16:35, JeffreyAdam wrote:
Fletch:
You have to hold it for two years to be tax exempt. This applies to up to $250k if single and $500k if married. If you sell it within the two year period, there is a chart they go by depending on the number of months owned what the tax is... Consult with your CPA.
Why not keept keep the first one as a rental, take some money out against it and buy the next one?? Food for thought!
Best Regards,
Jeff Adam
_________________
"Capture Motivated Sellers Automatically"
<font size=-1>[ Edited by JeffreyAdam on Date 11/07/2004 ]</font>
Is your intention to live in the 2nd one?
When will you purchase the 2nd one?
Quote:
On 2004-11-07 17:01, ceinvests wrote:
Is your intention to live in the 2nd one?
No,
When will you purchase the 2nd one?
I can purchase it next month !!
Ask your CPA. I know there is a new law coming into effect that states when you own a property that you did a 1031 on, you have to own it for 5 years. I dont know if this is the law yet. Ask your CPA!
Best Riches,
Jeff Adam
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"Capture Motivated Sellers Automatically"[ Edited by JeffreyAdam on Date 11/07/2004 ]
1. http://www.thecreativeinvestor.com/modules.php?name=News&file=article&articleid=573
Read excellent articles about 1031 exchanges right on this site!
Also, another article is posted about the new law that if you convert an exchanged property to your OO, you must now wait 5 yrs. to sell. Interesting read.
Hi Fletch58,
The Internal Revenue Service does not define the length of time that you need to hold your rental or investment property. Most tax advisors and 1031 exchange professionals, including myself, recommend at least a one year holding period in order to demonstrate your INTENT to HOLD the property as rental or investment property.
The five year holding period that was mentioned applies ONLY to a property that an investor is taking a 121 exclusion on as their primary residence if it was ORIGINALLY acquired as part of a 1031 exchange. I have posted an article on it under the Tax Strategies Section of this web site.
If you decide to hold both condos as investment properties and then sell the first one in about one year, the proceeds would need to be part of a 1031 exchange and you would have to acquire a third property in order to defer your capital gain taxes. The paydown of debt on the second property will not qualify for 1031 exchange treatment. That would actually be considered to be a sale of real estate and then a pay down of personal debt (not an acquisition of like kind real estate).
[addsig]
Thanks BIll & All
!! If I sell in 1 year at $575,000 and the realtor makes $25,000 and I paid 300K, what is the profit, 275K or 250K, thanks
On eeasy question
Quote:
On 2004-11-08 11:40, wexeter wrote:
Hi Fletch58,
The Internal Revenue Service does not define the length of time that you need to hold your rental or investment property. Most tax advisors and 1031 exchange professionals, including myself, recommend at least a one year holding period in order to demonstrate your INTENT to HOLD the property as rental or investment property.
The five year holding period that was mentioned applies ONLY to a property that an investor is taking a 121 exclusion on as their primary residence if it was ORIGINALLY acquired as part of a 1031 exchange. I have posted an article on it under the Tax Strategies Section of this web site.
If you decide to hold both condos as investment properties and then sell the first one in about one year, the proceeds would need to be part of a 1031 exchange and you would have to acquire a third property in order to defer your capital gain taxes. The paydown of debt on the second property will not qualify for 1031 exchange treatment. That would actually be considered to be a sale of real estate and then a pay down of personal debt (not an acquisition of like kind real estate).
$250K