All Forum Posts by: Konrad R.

Just to be clear. Your basis is always going to be rolled into the new property (100k). There isn't a way to just roll over the capital gains portion of the sale (300k) and cash out on the 100k basis.  Is that correct?

 It is a long term investment (20 years) in land.

I've read some conflicting information regarding capital gains tax. Is capital gains tax tiered? Here is a simple example:

Let's say ordinary income is 10k for a single person. The 10 to 15 percent tax bracket threshold for a single person is 37,500. Capital gains is 400k. I have read articles that say there is zero tax liability on capital gains if you are in the 10 to 15 percent tax bracket. I've also have been told this is not correct and that it would be tiered. Would the tax structure look like this:

-10k taxed as ordinary income

Capital Gain taxes on 400k (long term asset)

37,500 - 10k (ordinary income) would be 27,500. The first 27,500 of the capital gains would have zero tax liability. The remainder would be taxed at 15 percent (400,000-27,500= 372,500)

I spoke to a CPA briefly on the phone and he said I would be taxed a flat 20 percent. That doesn't make sense as it wouldn't be over the threshold to tax at 20 percent. I realize there are more tax implications such as medicare surcharge.

I may be able to push back the closing. I'm waiting on a response from the buyer.

I do have a couple more questions, however.

-I read an old thread on this forum pertaining to 1031 exchanges. Someone mentioned that there must be a history of the newly acquired property being a rental/investment property. Can I purchase a home from someone that is using it as a primary residence and convert it into a rental property? What this satisfy the like kind requirement of a 1031?

-Can I allocate only a portion of the capital gains into the exchange? For example, if I am receiving 400k from the sale of the property, can I just use 200k for the 1031? I realize I will have to pay capital gains tax on the other 200k. If I am able to only do a portion of the capital gains on the sale, when can I take out the money not being rolled into a 1031? Do I need to place the whole 400k with the intermediary at closing?

Thanks again for all the help. It has definitely been a learning experience.

Thank you for the help.

One last thing. I've read that the intent to do a 1031 exchange needs to be mentioned in the real estate contract. We haven't closed yet. Once the contract is finalized, is it too late to take advantage of a 1031 exchange if it wasn't mentioned in the contract?

I'm selling a property (land) and would like to defer taxes. I've been doing some research on 1031 and do not know if I even would qualify. 

One thing I have read is that the title must mirror one another (sale and new purchase). The property I am selling is owned jointly with another person. The new property would be in my name only. Does this automatically disqualify me from doing a 1031 exchange?

Also, are houses being held for resale/renovation (i.e. flipping) excluded from 1031?

Are there any good books pertaining to tax considerations for real estate investing?