When Should I Pay Taxes After Closing?
If I just double closed on a property and made my money, paid out the money to my bird dogs and bill of sale, what do I do about taxes? Do I need to pay taxes now? Do I send out 1099s now also?
Short answer: Yes!
Rental houses can be 1031 exchanged for another property(s) held for Investment purpose.
A construction exchange is a bit complex- you will have to use licensed contractors and will not be able to pay yourself for work, as I recall. There is also the problem of completing it in the six month exchange window. It is more costly as the qualified intermediary has to handle the money for the duration, paying suppliers, contractors, etc. But the first step is ensuring that the property you are going to construct is considered like kind.
Chris
No, you buyer must be an unrelated 3rd party for a 1031 exchange. Seek the advice of a professional lawyer or CPA for further details.
Quote:
On 2008-02-20 17:28, finniganps wrote:
No, you buyer must be an unrelated 3rd party for a 1031 exchange. Seek the advice of a professional lawyer or CPA for further details.
I understand, but the 1031 definition of related party is "more than 50%". I own exactly 50% of the LLC so I would not be a related party.
Look up the self dealing rules.
No, it will not work.
You are correct in that related parties would be entities where you own more than a 50% interest.
However, the structure was crafted specifically for tax evasion, so that would be your first hurdle. There is no economic substance or benefit behind the transaction except to avoid taxes.
Also, when you contribute property to a partnership you typically contribute it at fair market value. It appears that you are contributing it at a lower value for tax avoidance purposes.
The overriding guideline here is that the purpose of the transaction is tax avoidance, so the IRS would collapse the overall structure as a "step" transaction to avoid tax and then tax you accordingly.
It is the old adage, "if it seems to good to be true, it is probably tax avoidance."
[addsig]
crafted specifically for tax evasion..
Tell us how you REALLY feel about it!!!