Is There Anyway For Me To Avoid Capital Gain Taxes?

I purchased a 2 family house in Brooklyn, NY in June 2004 for $349,000. I am ready to sell. I have a buyer who wants to buy it for $525,000. I was told that since I did not own the property for 24 months that I would pay capital gains taxes of at least $70,000 on the $175000 profit. Is there any way around this? All of the investors I see in Brooklyn, NY I know are not paying these ridiculous taxes on their profit.



I need cash.

Comments(4)

  • finniganps15th November, 2005

    DUPLICATE POST - already answered at:
    http://www.thecreativeinvestor.com/commercial/ViewTopic51380-24-2.html

  • NewKidInTown315th November, 2005

    Note to moderator. This question was not answered completely in the other forum. Do not delete this post, delete the other one.

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    You are right. None of the investors in your situation would pay that amount of tax, and neither would you.

    Since you have owned the property at least one year, your capital gains tax rate will be only 15%. On $175K profit, this equates to $26250 in tax on your profit due to appreciation. Unrecaptured depreciation will still be taxed at 25%, though this amount should be somewhat minimal after only one year of ownership.

    The savvy investor will acquire a replacement investment property in a 1031 exchange. This eliminates capital gains and depreciation recapture

    If you actually used one of the units as your primary residence while renting out the other, the savvy investor in your situation will still do a 1031 exchange to cut the potential capital gains tax bill in half.

    At 15%, the capital gains tax on your residence unit will only be $13125 on a sale profit of $87500. The balance of the sale profit, allocated ot the rental unit, will be sheltered with the 1031 exchange.
    [ Edited by NewKidInTown3 on Date 11/15/2005 ]

  • NewKidInTown315th November, 2005

    It is not an accountant you need here. Instead look for the IRA custodian that meets your qualifications.

  • jerin17th November, 2005

    Hi-I am in Royal Oak, and am also looking for a CPA who is knowledgeable in real estate issues. Let me know if you find anyone-
    Thanks-jerin

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