Taxes on selling properties for the same amount I bought them for

[Josh Pass]

hi, I bought three properties 1+ years ago through a turn key company.  It hasn’t worked out as I’ve liked so the turn key provider offered to buy them back from me for the same amount that I bought them for.  

This actually sounds good as I could use some if it to pay off some debts and then reinvest the rest.

My main concern, though, is taxes.  Since I’d be selling them for the same amount I paid for them, would I have any taxes to pay?  Would I need to reinvest all of it in order to dodge taxes?  Could I keep some if it to payoff some debts and then reinvest the rest without paying taxes?

Basically I want to minimize my tax burden or not have any taxes to pay at all if possible.  Thoughts?  I’m waiting to hear back from my CPA but it’s his busy time rohot now so haven’t heard back yet so figured I’d ask here.

[Ashish Acharya]

@Josh Pass , 

You might actually have a loss if you did some improvement on the property and with all the selling expense that you might incur. Also when you bought the property, some of the settlement cost would have been added to the basis, so your basis should have increased from your purchase price. 

So when you sell the property, your basis will be ( simplified ) 

purchase price (100k)

+Settlement cost( +5k)

+ improvement (  0 since its turn key) 

- depreciation (-5k)

= adjusted basis ( 100k) 

SAle 100k - adjusted basis 100k = no gain. 

But, the amount of depreciation you took during your rental ownership, that will be taxed at 25%.

So, if you took depreciation expense of 5k, you will owe 1.25K on taxes. 

You dont get taxed on the sale price. You get taxed on the gain. If you sell for an exact same amount, you might not have any tax, but need to know your numbers to tell you.  Only tax you might pay is depreciation recapture tax mentioned above. 

The 100k sale proceeds you get is free to pay a debt back and reinvest, no tax implication. 

Good luck.