Capital Gain On Sale Of Rental
My rental is now in escrow and I have been told to use a 1031, but I have no properties in site. The title co won't allow land trust transfer so I will now be liable for 38k profit. I need to have some of the cash for remodel of my own home. If I put it in a directed IRA ...is it true that I can use the $ to buy investment property later? and can I use the $ to upgrade my home? My biggest question is ....is there any other ways to not pay C.G. taxes? 
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Check the rules for 1031. You still have time to identify a potential property and time to close on it (45 days from close to identify and 90 to close with an accommodator). I am not personally familiar with the IRA rules but outside $$ would be after tax. Borrowing against your IRA is possible but I have never had to do such. I am sure someone out there knows much more on the IRA rules.
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Quote:My rental is now in escrow and I have been told to use a 1031, but I have no properties in site. The title co won't allow land trust transfer so I will now be liable for 38k profit. If you have not closed escrow, it is still possible to initiate a 1031 like-kind exchange. You will need an escrow exchange agreement, and an exchange escrow agent. Your lawyer can draft the exchange agreement, and the trust officer at your bank could probably serve as your escrow agent. You will still have to identify a replacement property within 45 days of the sale of your relinquished property, and complete the purchase within 180 days of the sale.
I don't understand your statement The title co won't allow land trust transfer so I will now be liable for 38k profitTransferring title to a land trust to facilitate the sale of your property does not shelter your profit from capital gains taxes. Even with a title transfer to a land trust, you are still liable for your profit. Perhaps you had something else in mind that did not come through clearly.
Quote:I need to have some of the cash for remodel of my own home. If I put it in a directed IRA ...is it true that I can use the $ to buy investment property later? and can I use the $ to upgrade my home?Without using a tax deferred exchange, you will have to pay the capital gains taxes on the sale profits and depreciation recapture as well. The maximum capital gains rate is now 15% while depreciation recapture is still 25%. Since you are playing with after-tax money, you are free to do whatever you want. You can remodel your current home, take a vacation, or just bank the money for a future investment opportunity. Contributions to your IRA are limited by your W-2 income and I believe there is an annual cap as well (is it $3000?). Once money is in your IRA, taking it out will subject you to early withdrawal penalties and maybe some income taxes too.
Quote:My biggest question is ....is there any other ways to not pay C.G. taxes?Yes, there are a couple of ways, besides a 1031 exchange, to minimize the CG taxes on your sale profits. Sell another capital asset at a loss. If you have stocks with a paper loss, sell them. Use the tax loss on the stock to offset your taxable gain on the rental property.
If you have suspended passive losses on your rental property, your suspended losses will be added to your basis to reduce your net capital gain.[ Edited by DaveT on Date 09/21/2003 ]
DaveT, Great reply.
Folks, lets keep in mind that captial gains is only 15% now. Sometimes we don't always need the 1031.
I agree with Dave - You need an intermediary that will let you park the money until and if you find a suitable exchange property. IT will cost you some bucks but it can be done. Get rid of that title company.
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