Selling a Rental Property within year! Tax Consequences, etc.

[Ryan Hutchins]

Hey Everyone!

My partners and I built a rental property for $350,000 and have an opportunity to sell it for close to $750,000+ based on comps in the surrounding area for the last month. Construction started in February of 2021 and we took over as the owner of the property in November 2021. As such, if we sold the property, we would be taxed at ordinary income rates, which for two of the partners, is 40.0%. After paying off debt, our return on capital injections exceeds 100.0%. 

In order to avoid the 40.0% ordinary income tax, we would have to wait until November to close on the transaction to recognize a 25.0% long-term capital gain tax. Is there any way around waiting until November to transact and still recognize a 25.0% tax rate? If yes, how? 

Thanks!!!

[John Underwood]

Quote from @Michael Baum:

If you are planning to buy another property, you could do a 1031 exchange into another property. Avoid the taxes right now all together. It just kicks it down the road.

You could also invest in a QOZ fund. That would lower the taxable amount by 10% + and push it down the road a bit as well.

https://www.robertprussocpa.co...

I am not a CPA or anything, but I would contact one or a tax lawyer to see what else can be done.

 Lease it to buyer then close in November.