Profit Without Getting Into Trouble With The IRS - Posted by Joe brown

Posted by John Merchant on January 19, 2003 at 12:14:59:

at Great site. Check it over.

Profit Without Getting Into Trouble With The IRS - Posted by Joe brown

Posted by Joe brown on December 18, 2002 at 10:33:10:

I am tring to come up with the most creative way to profit from this REO I just got for 100.000. It appraises for 130.000. Other homes in the neighborhood are saleing for 170.000. I am doing some work to it and would like to profit 60 thousand without getting into trouble with IRS. thanks ahead of time for any help or guidence. Also if your advise allows me to profit the 60 then I am willing to pay you for that information.

Another possibility - Posted by randyOH

Posted by randyOH on December 21, 2002 at 14:27:31:

You could keep it as a rental and do a lease/option. You could finance it with a bank at, say, 80% of appraised value. So you would get $170,000 x .8 = $136,000 out of the property tax free. You could also probably get at least a $5,000 option fee from your tenant, also tax free. The option fee is not taxable until you actually sell the property. Then, hopefully, your rent would at least cover your costs to hold the property. You can have the tenant be responsible for all repairs and maintenance. So your landlord problems would be minimal. And probably the best feature of this program is that you would be selling the property for top dollar without having to pay a realtor. Of course, you would get the rest of your profit when the tenant exercises his option and actually buys the place. When that happens, you could then do a 1031 exchange. I use two-year option periods.

Again, the big advantage is to be able to sell for top dollar without using a realtor. Some people estimate that you can get around 10% higher price on a lease/option. When you combine that with saving the 6% commission, you are probably talking double the net profit. Just a thought, good luck.

Re: Profit Without Getting Into Trouble… - Posted by Scott-CA

Posted by Scott-CA on December 19, 2002 at 21:35:33:

You will not get into trouble with the IRS for making a profit. They like us to make profits as long as they get their fair share. I?m not an accountant but here are a few options (legal, but not all that creative):

  1. If you need the cash, sell the property when it?s ready and just declare it on your tax return, write off the expenses, and pay the taxes. You can do whatever you want with the rest of the cash.

  2. If you live in it as your residence while you work on it and continue living there for two years total, you can sell it and keep all the profits without paying any taxes.

  3. If you don?t need the cash anytime soon, do what John said. Do the 1031 exchange and use all the ?profits? to buy another property.

-no charge-

1031 or exchange - Posted by John Merchant

Posted by John Merchant on December 18, 2002 at 12:53:34:

If you use a 1031 tax deferred exchange then you’ll pay NO tax on this deal at selling time; call Starker Exchange Services, which is nationwide, or some other 1031 Exchange service in your area for their info and cost schedule.

And of course, if you were to just swap your profit position, before you take the actual profit, for another larger property, you’d pay no tax on this gain. It’d just be rolled into the new property. Your CPA or tax accountant can help you with this.

To look at other possible exchange properties, nationwide, look at, the website for NCE. Lots of motivated property holders nationwide and you might well see something in there that you’d like to trade for.

Re: 1031 or exchange - Posted by roxann

Posted by roxann on January 19, 2003 at 11:56:40:

Please tell me what is NCE?? I would be interested in taking a look at there web site.

Thanks in advance:-)