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$5k For Cap Gains/Tax/Opinion Quote - that reasonable?
I’ve been quoted $5k to have a cpa tax attorney (firm) crunch wife and my numbers to determine possible cap gains on sale of rental. They’ll determine best route in how to essentially to pay the least amount in capital gains, should we sell, 1031, invest etc. being attorneys they can do a little more than CPA’s my research says.
Wondering if the $5k and an about a month time is worth it?
My understanding is in their ‘opinion’ they can be creative in some areas of 1031 or 121.
Wife and I are late 30s with two little kids and the $5k could fix both bathrooms in the rental we want to sell. Granted there is some peace of mind having a tax attorney cpa sift through our financials and dates and lay out for us various plans.
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- Tax Accountant / Enrolled Agent
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Your research is wrong. It does not matter whether your advisor is a CPA, an attorney, an EA, or someone without credentials. Knowledge and experience is what matters, and credentials do not guarantee it.
As I already told you on your other post - there is no creativity with 121 after the 3-yr window lapsed. Also, as I and @Dave Foster told you on that other thread, there is no honest creativity with 1031 if you plan to 1031 into a residence where you will live immediately. Finally, other tax deferral strategies prevent you from getting immediate cash, and your stated goal was to get cash for a down payment.
Either this firm does not understand what you're hoping to accomplish or they are not being straightforward with their promises to you. Or they know something that the rest of us do not, which is not very likely.
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Original thread here for reference
https://www.biggerpockets.com/forums/51/topics/1195208-1031-...
@Michael Plaks suggestion of considering cash out refi was a strong option. Is there a reason you didn't consider it?
Feels like Partial 1031 Exchange would also be an opportunity, correct me if I'm wrong @Dave Foster, if you continue to rent out the property after the sale.
Is there a reason you went straight to "creative" and "attorneys they can do a little more?" You're the one that will be paying the taxes, penalties, and consequences if you take this route and it fails. Make sure it's legit.
Quote from @Sean O'Keefe:
Original thread here for reference
https://www.biggerpockets.com/forums/51/topics/1195208-1031-...
@Michael Plaks suggestion of considering cash out refi was a strong option. Is there a reason you didn't consider it?
Feels like Partial 1031 Exchange would also be an opportunity, correct me if I'm wrong @Dave Foster, if you continue to rent out the property after the sale.
Is there a reason you went straight to "creative" and "attorneys they can do a little more?" You're the one that will be paying the taxes, penalties, and consequences if you take this route and it fails. Make sure it's legit.
Two different topics/questions therefore 2 different threads.
Cash out won't work. Rates too high, I couldn't rent to cover the cash out of $400k+. HELOC also won't work, won't loan the amount we need
I’m not satisfied by my own rudimentary following of 1031, 131 and other means of saving on taxes as they are written. I know there’s the way the laws are written and then how they are interpreted. Being a landlord is not my 9-5 clearly.
Projections, best ways to save on taxes, and other options are what I’m looking for. Not sure if the $5k and them providing all that will help or not. If the $5k saves me $10k or more on taxes I’d say that’s worth it.
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- Qualified Intermediary for 1031 Exchanges
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@Michael Plaks, or they're hungry :). @Patrick Irish, If paying money buys you peace of mind then go for it. But $5000 just to determine your tax liability and run scenarios on outcomes of a 1031 exchange and tell you if you qualify for a 121 exemption??? That smells like the bathrooms you want to renovate!
1. Your current accountant should have the exact number that is your adjusted cost basis of the old property at their fingertips. Every year it's updated on your tax return. No ambiguity there. and probably 10 minutes of work. After that its just a question of guessing what you would sell your property for and subtracting the adjusted cost basis from that number - again not exactly $5k of work.
2. Figuring different taxability levels in a 1031 exchange if you're thinking of a partial exchange is perfectly straightforward. Any amount you purchase less than your net sale - that amount is taxable. Any amount of cash you take from the sale - that amount is taxable. There are any number of 1031 intermediary websites that have calculators designed to do this exact thing for you. I have one of these calculators on my website too. It's a pretty darn good one if I do say so. And it's free :)
You've heard from 2 cpas, one degreed accountant and 1031 QI, and one of the brightest minds on BP in @Wayne Brooks. Spend the $5K on the bathrooms. That will be a better return. I promise!
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- Tax Accountant / Enrolled Agent
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Quote from @Dave Foster:I vote for this comment as the best BP comment of 2024
That smells like the bathrooms you want to renovate!
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I did not read the other post. YOU need to know pretty close to what the tax people know. Maybe not all the details, but have a pretty good handle on what you are wanting to do, or what you think you should do.
When the tax guy or the accountant says that you might want to do this, YOU should already know why you do or do not want to do this. Again, you do not have to know every line of the tax code, but have a good understanding of what happens when you do something. And make sure that you know this stuff for YOUR situation.
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$5000 seems like a lot of money for that. Why not run different scenarios on your tax program that you use to file taxes or have your accountant do it (if you use one)?