Posted by Bill H on November 05, 2004 at 13:44:45:
Not much, two things are certain, “Death and Taxes.”
Be glad President Bush was reelected as Mr Kerry has already said he was going to raise taxes.
Get a good CPA…go over it…pay the taxes…be glad you have the $$$ and wherewithall to do so…move on.
We do it every year.
Good Luck,
Bill H
What could I do about Capital Gains?? - Posted by Lexxy032
Posted by Lexxy032 on November 05, 2004 at 10:47:27:
Hi,
I’m trying to get information on any scenario that I could do to avoid or diminish capital gains?
My Situation:
My husband and I own a 3 apartment building for 6 yrs in Chicago. I rented 2 apartments and we lived in one for 6 yrs as our primary residence.
4 month ago we bought a single family home in Florida. This home became our primary residence now and the building in Chicago is my investment property.
Now, after 4 month we decided we want to sell the building in Chicago. But was told to us that we we’re going to have to pay 20% to 25% in capital gains.
How could we avoided this much capital gains?
I now know we should have sold the building first then buy the house. But we didn’t know anything about capital gains.
Do we still qualify for the $500,000 exclusion from the tax reform act?
I bought the building 6 years ago for $175,000, I refinance 3 times bringing the total to $375,00.
We’re planning to sell the house for $700,000.
If I have to pay capital gains, Do I pay $700,000 minus $175,000 or $375,000?
Re: What could I do about Capital Gains?? - Posted by William L. Exeter
Posted by William L. Exeter on November 08, 2004 at 10:54:14:
Based on the details provided you should qualify for the 121 exclusion ($250K if single and $500K if married) for the portion that you lived in as your primary residence and you could do a 1031 exchange on the balance and buy replacement rental property. This would either avoid or defer all of your capital gain taxes. It requires a good CPA or other tax advisor to allocate the values between the 121 exclusion and the 1031 exchange.
Re: What could I do about Capital Gains?? - Posted by John K Haslach, CPA, MST
Posted by John K Haslach, CPA, MST on November 06, 2004 at 04:52:54:
Now, after 4 month we decided we want to sell the building in Chicago. But was told to us that we we’re going to have to pay 20% to 25% in capital gains.
>>If you own the building for less than a year, your gain will be taxed at ordinary income rates (whatever rate your other income is taxed), and not the reduced capital gains rates. Long term capital gains rates are 15% with recapture of deprecation on real property at 25% and personal property at ordinary income rates. If you must sell, consider holding on to the property for a year.
How could we avoided this much capital gains?
Consider a 1031 exchange or don’t sell.
Do we still qualify for the $500,000 exclusion from the tax reform act?
>>This applys only to the sale of your personal residence.
I bought the building 6 years ago for $175,000, I refinance 3 times bringing the total to $375,00.
We’re planning to sell the house for $700,000.
If I have to pay capital gains, Do I pay $700,000 minus $175,000 or $375,000?
>>It would depend on what you did with the $200,000 ($375,000 - $175,000). If you used the money to improve the building you are selling, it would become part of your basis. If you used the money for something else, it would not become part of the basis in that asset.
Hope this helps.