Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here
Pick markets, find deals, analyze and manage properties. Try BiggerPockets PRO.
x
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Thomas F Blaskey

Thomas F Blaskey has started 1 posts and replied 1 times.

Post: 1031 vs Gift vs Sale

Thomas F BlaskeyPosted
  • Homeowner
  • El Paso, TX
  • Posts 1
  • Votes 1

Seeking informed opinions on the best tax avoidance strategy...

I own a SFR in NoDak. I purchased it ($265,000) in 04/2022 for #2 son to live in while he attends college. I have been deliberately managing it as a rental (ie, contract, collecting rent, etc.). I plan on selling it ($300,000) in mid-2025 after he graduates. I am now thinking about different tax strategies and would appreciate insight as all my experience in real estate has been on (my) primary residences.

The options I see:

1) Sell outright and pay Capital Gains tax (15%), depreciation recapture, etc.  Since I will have owned it only 3 years, the property value increase is minimal ($35K) and closer to $15K once I pay a listing agent and closing fees.

2) Gift it to #2 son now and let him pay the Capital Gains tax at his rate (0%) when we sell next year.  If we sell it inside a year (short-term), his regular tax rate is still low because he has no regular income.  I figured he can't claim as a primary residence as a renter even though that's been his only address for 3 years? I am aware that I would have to claim a large gift tax exclusion but $300K is relatively small.

3) Use a 1031 exchange to sell this property and buy an equal/greater one in AZ, where #1 son lives.  I would then make him my renter and kick the can down the road to figure out how to gift it to him.

It seems as if the 1031 exchange fees might be a wash with the taxes?  Thoughts?  Any other scenarios or details I'm not thinking about?