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Home sale and cap gains

Old 10-04-2010, 06:13 PM
  #21  
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Most of the comments here are correct concerning the first $500K as exempt. From here you need to consult a "good" CPA that is familiar with these type of transactions. Not all CPAs are well versed in these matters. Ones that aren't will charge an arm & leg for research - been there done that. You may have other events that can help reduce that taxable burden. You can do a lot of research online - all the codes are there for you to read.

Good Luck but even paying $60K is not all that bad for that kind of gain. Some of the 1031 advice is good also, just make sure the escrow is with a reputable title company or attorney.
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Old 10-04-2010, 06:28 PM
  #22  
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Make certain you have accounted for every dollar that should be in your "basis" calculation. Every documented dollar of improvement will save you 15%.
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Old 10-14-2010, 11:17 AM
  #23  
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$1m + transaction and you can't break open the wallet to pay a competent CPA?
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Old 10-14-2010, 11:25 AM
  #24  
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Originally Posted by oneill469 View Post
If I spun off the bulk of the property now to purchase the new land and waited 2-3 years to sell the house and move....how would that impact me?
  1. Risk that cap gains rates will be higher when you sell the remaining property.
  2. Sale of raw land does not qualify for the personal residence exception so 100% of the net gain would be taxable.
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Old 10-14-2010, 12:21 PM
  #25  
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btw there are a LOT of people out there sitting in 'exchange property' who would give their right arm to have just paid the l/t cap gain tax a few years ago and actually gotten their money.
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Old 10-14-2010, 02:31 PM
  #26  
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Assuming you are married (as all the above posts have), you would not be liable for capital gains on the first $500k. The remaining $400k would be taxable less any improvements you can documents as suggested by another poster.

Separating the property into two parcels to utilize one as residence and one as a 1031 exchange would most likely backfire as you may be burdened with proof that it was an investment. Proof that you would obviously not be able to show.

Many good advice posts here, however, I would not talk with a CPA. For that amount of taxable income, you may be better to speak with a tax attorney AND a financial adviser to see where you can place the money and utilize pre-tax credits or investments. This will be little more than a tax deferment as you will have to pay tax on it sometime, but so is a 1031 exchange. Ultimately, you will not be able to hide from the IRS. You can defer or you can pay up now.
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Old 10-14-2010, 02:47 PM
  #27  
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1031 exchange, also known as a Starker exchange, applies only to investment real property.

There is a capital gains exclusion for the first $250k of profit on the sale of an individual's home, and $500k for a married couple, if they have occupied the house as their residence for at least 3 of the five years previous to the date of the sale closing. If you have made improvements to the property, it will raise your basis in the property. for example, if you bought the property for $200k, and spent $25k to build an addition, your basis would be $225k.
"Improvements" does not include maintenance items like painting or new shingles.

If your property was being used as an actual farm [ you grow live stock and/or crops for the purpose of selling them for a profit to obtain income], then special rules apply which basically break up the property into the residential part and the business part.

You need to consult a qualified tax professional [CPA, tax attorney] in your area rather than relying on a bunch of morons like me on an anonymous website.
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Old 10-14-2010, 03:20 PM
  #28  
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Originally Posted by GWcpa View Post
You guys are brave if you do a 1031 now. A large 1031 intermediary in my area went bust and hung the sellers/ customers. Lost the proceeds of the sales, could not complete the purchases, so sellers had to pay taxes on the gains, even though the proceeds of the sales were lost. Nightmare!


DAMN THAT IS SCARY Never thought of that happening
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Old 10-14-2010, 04:33 PM
  #29  
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Thanks folks. We will use a CPA and RE Attorney when the time comes. We are in the panning stage now and I thought I would get some input from My "THT Friends".
Ya'll are great.
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Old 10-14-2010, 06:58 PM
  #30  
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Originally Posted by oneill469 View Post
Thanks folks. We will use a CPA and RE Attorney when the time comes. We are in the panning stage now and I thought I would get some input from My "THT Friends".
Ya'll are great.
Don't use a real estate attorney - use a tax attorney that is familiar with real estate. I am a seasoned real estate broker and I can tell you that MOST real estate attorneys know very little about this unless they specialize in it. Most of them do little more than explaining mortgage papers and settlement statements to people and point to the signatory lines. Out of about 20 different real estate attorneys that I have personally used in my area, there is only 2, maybe 3 that I would recommend to use on a regular basis and not one of them would I recommend to handle your needs.
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Old 10-14-2010, 08:10 PM
  #31  
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Thanks damion
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Old 10-15-2010, 05:01 AM
  #32  
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the atty you should already have been talking to about setting up trusts to keep the land in the blood family when 1 or 2 of your kids gets divorced should have recommended a CPA to you and they should be working together on the entire deal start to finish.

one last thing....NEVER use a 'title company'. Only good local atty's for the area in question.
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