Tax Shelter
I am cashing out on an investment I made back in 1997 on a 3 family Brownstone. I may do a 1031 on some land I am investigating, but is there any other way to alleviate some of the gains and depreciation capture I will face on this sale? Appreciate any advise.
Let's assume that you have no other assets that could be sold for a taxable loss to offset your taxable gain. Ways to avoid or minimize the taxes due on the sale profits include:A 1031 like-kind exchange will allow you to defer some or all of your profits from capital gains taxes.
An installment sale will spread your tax liability out over the life of the installment sale loan. This will allow you to pay your capital gains taxes in installments -- keeping the total tax bite relatively small in any one year. In the second and subsequent years, the interest income you receive on your installment sale note might be larger than your installment tax bill.
Donating your property to a charity will give you a charitable deduction and avoid capital gains taxes entirely.
A charitable remainder trust and a charitable gift trust are other avenues to charitable giving while still retaining use of the property during your lifetime.
Don't sell the property. If you don't sell, there is no profit to tax. You don't tell us why you are selling. Selling just to exchange to another investment property is not a compelling reason to sell.
Wait until the year 2008. If you are in the 15% tax bracket (or lower), your sale profits are tax free if you sell your investment property in that year only. Capital gains taxes are reinstated in 2009.