Posted by Bill K. (AZ) on May 04, 1999 at 22:19:23:
Chris,
Yep. That one got changed. The third paragraph of Phil’s post explains the limitations, and he’s correct. No need to rollover your gains to avoid taxes any longer.
Bill K. (AZ)
Minimizing IRS taxes due - Posted by Joe
Posted by Joe on May 04, 1999 at 17:39:04:
I recently encountered an opportunity to put a deal together on a property which had a zero mortgage. The catch was that the owner was afraid of getting all cash and feared owing too much to the IRS! How could it have been structured to help minimize his IRS obligation?
Re: Minimizing IRS taxes due - Posted by JHyre in Ohio
Posted by JHyre in Ohio on May 05, 1999 at 07:35:05:
Joe,
All good advice below…as one would expect from the names involved. Questions: Does the owner live in the property? If not, how long has he owned it? How much has it been depreciated? Does the owner want the cash to retire, buy a house, give to his kids? Is the property owned by owner directly or through some sort of entity?
John Hyre
Re: Minimizing IRS taxes due - Posted by Nancy Cason
Posted by Nancy Cason on May 04, 1999 at 21:44:24:
If the owner lived in the house two out of the last 5 years they do not have to pay capital gains up to certain dollar limit and they do not have to buy another house within two years. (Yes Chris they did change that part).
If the owner did not live in the house as a primary residence then an installment sale is one way to spread out the tax bite.
If the owner has property to give to a charity as in a charitable remainder trust, or even an outright gift he would be able to offset the tax bite.
If the seller does not understand all of this. Lead him/her by the hand. Get a copy of IRS form 6252 and instructions (Installment Sale Income) and show them the tax calculations. Of course more goes into his tax posture than just this one sale, but it could be a means of convincing him/her to owner finance.
Worth a try.
Have fun and keep a positive mental attitude.
Nancy
Re: Minimizing IRS taxes due - Posted by phil fernandez
Posted by phil fernandez on May 04, 1999 at 17:51:45:
If your seller has not flipped alot of properties quickly and is not classified as a dealer by the IRS there are a few things you could do to minimize his tax obligations.
How about letting the seller owner finance the property to you. Let him take a mortgage. you make the monthly payments to him. This way he will not receive his entire profit in a single year. By spreading his gain out it might keep him in a lower tax bracket.
If the house has been his primary residence for I think it is two out of the last five years and his gain is less then $500,000 if he’s married or less than $250,000 if single, then there would be NO taxable gain on the sale. Even if he received all his money in one lump sum.
If not his primary residence, he could find another property to trade for using the 1031 tax free exchange. By doing this, he is delaying any gain at this time.
John Hyde might be able to jump in here with more creative ideas.
Phil, in order for the sellers not to pay capital gains tax… - Posted by Chris ~ TX
Posted by Chris ~ TX on May 04, 1999 at 21:24:15:
…wouldn’t they be required to buy a house that was of the same value, or more than, the house they’re selling within two years of the sale? Or did the IRS go and change that one too? lol
Chris
thanks y’all… i didn’t even know they had changed that lol (nt) - Posted by Chris ~ TX
Posted by Chris ~ TX on May 05, 1999 at 12:30:40:
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Re: Phil, in order for the sellers not to pay capital gains tax… - Posted by phil fernandez
Posted by phil fernandez on May 05, 1999 at 07:18:37:
Hi Chris,
The IRS did change that requirement. No longer do you have to buy a replacement house of equal or greater value within a two year period.