Newbie - How to Avoid Capital Gains on Land? - Posted by chris

Real Estate Investing Real Estate Financing
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Posted by David Krulac on March 05, 2003 at 13:25:37:

however there are other things that you can do to reduce taxes.

  1. rent the land rather than sell it, however be careful as IRS considers a 30 year or more lease to be a sale.

  2. option the property for a high option amount and a long period of time. Option considerationsare not taxable until the option expires or is exercised.

  3. if this property is as prie as you say why sell, prime property usually just gets primer as time goes on. There only is so much water front property.

  4. IRS code section 1031 tax free exchange.

David Krulac
Central Pennsylvania

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Newbie - How to Avoid Capital Gains on Land? - Posted by chris

Posted by chris on March 05, 2003 at 09:33:49:

I’m negotiating with the seller of 3 waterfront parcels (all adjacent) should have the deal closed today. I intend only to keep one lot (prime of course) for my own and sell the other two. I already have a potential buyer for one of the lots. Question, can I do a double close and never take possession of the lot that I would sell to this buyer, thus avoiding tax? Any other creative solutions are welcome. BTW, this forum is the best!

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Re: Newbie - How to Avoid Capital Gains on Land? - Posted by Todd B (Va)

Posted by Todd B (Va) on March 07, 2003 at 16:06:49:

Set up a self-directed Roth IRA.

Have the IRA as the purchaser on the contract/option(only on the 2 you are going to resell)

Have the IRA flip the property or sell the contract/option

The money going into Roth IRA was taxed on the way in, it is not taxed on the way out. If you needed the money out of it you could take it out, and only pay the 10% penalty, with zero tax. Better to leave it in there though, for future deals.

Todd B (Va)

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Re: Newbie - How to Avoid Capital Gains on Land? - Posted by Nate(DC)

Posted by Nate(DC) on March 05, 2003 at 20:06:19:

If you never took title, any profit would be considered ordinary income and taxed at the HIGHER rates (i.e. not long term capital gains rates) - sure as H*LL would not be TAX FREE!!

NT

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Re: Newbie - How to Avoid Capital Gains on Land? - Posted by Don Dion

Posted by Don Dion on March 05, 2003 at 15:09:09:

Why not sell the property on a 13 month land contract. That way you get interest only payments for the 12 months and the buyer takes you out in the 13th month with a mortgage loan. This way you dont get your on the principle until your into long term gains.

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Re: Newbie - How to Avoid Capital Gains on Land? - Posted by Bill

Posted by Bill on March 05, 2003 at 15:03:32:

I’m not a tax expert, but Why don’t you do a 1031 exchange if possible (http://www.realtyexchangers.com/whatisa1031.shtml). Depending where you are there might be a $25K limit for those making under $100K. I would do the exchange for a rental. after a cpl of years move into the rental then sell it as your primary residence. You get a $500K exclusion…Look it up. i hope this helps somewhat.