Question regarding pay capital gains or buy property

[gb]

Has the transaction already closed ??

Funds are with an accomodator and must close Escrow on an upleg property by Dec 15.

[HLS]

Dec 15th closing meaning that you closed escrow on your 5 plex on June 15th ?

Paying the income tax is throwing away $200K FOREVER.

Buying in CA is not your only option. For a full 1031,
You will probably need to purchase a property of equal (or greater) value, AND carry the same amount of debt that you had on what you sold.

Although you stated your selling price, what was your final amount of debt, and how much cash do you now have ??

Buying a $1.5M+ multi unit residential complex out of state in a stable market can bring you a cap rate of 10%++

With $800K in cash, depending on the rest of your financial picture, I would consider properties in the $2.5m range with 30% down. The gross rents could easily be in the range of $20,000-$25,000 per month and your adjusted depreciation would be huge, carried forward if not needed at this time
and providing you with an excellent stream of income.

If you are looking for long term gains AND don’t need the cash, I cannot fathom why anybody would recommend paying Uncle Sam $200K and walking away with the cash.

Conservatively, that $200K would be 40% down on a $500K building, still providing you with great net income that would be ZERO from $200K paid in taxes.

Again, I am NOT talking about buying in CA.

[HLS]

Dec 15th closing meaning that you closed escrow on your 5 plex on June 15th ?

Paying the income tax is throwing away $200K FOREVER.

Buying in CA is not your only option. For a full 1031,
You will probably need to purchase a property of equal (or greater) value, AND carry the same amount of debt that you had on what you sold.

Although you stated your selling price, what was your final amount of debt, and how much cash do you now have ??

Buying a $1.5M+ multi unit residential complex out of state in a stable market can bring you a cap rate of 10%++

With $800K in cash, depending on the rest of your financial picture, I would consider properties in the $2.5m range with 30% down. The gross rents could easily be in the range of $20,000-$25,000 per month and your adjusted depreciation would be huge, carried forward if not needed at this time
and providing you with an excellent stream of income.

If you are looking for long term gains AND don’t need the cash, I cannot fathom why anybody would recommend paying Uncle Sam $200K and walking away with the cash.

Conservatively, that $200K would be 40% down on a $500K building, still providing you with great net income that would be ZERO from $200K paid in taxes.

Again, I am NOT talking about buying in CA.

[HLS]

There is a 45 day identification period and 180 day closing date, so I am confused by your time line.

If you need to CLOSE by Dec 15th, it’s already too late to identify.

SORRY, I missed the post where you state that you alreday identified your 3. My bad.

[HLS]

There is a 45 day identification period and 180 day closing date, so I am confused by your time line.

If you need to CLOSE by Dec 15th, it’s already too late to identify.

SORRY, I missed the post where you state that you alreday identified your 3. My bad.

[luchabee]

Next time, before selling this type of appreciated property, you may want to consider a Charitable Remainder Trust (CRT), especially if you are older.

The Charitable Remainder Trust is the ONLY vehicle that will allow you to completely bypass all capital gains tax due on the sale of property. In return, you will receive an income stream based on the appraised value of the property before the sale, a substantial charitable deduduction to offset taxes, and you will be able to benefit your favorite charity or charities after you pass away.

They are very flexible. The only real “downside” is that you must leave at least 10 percent of the initial appraised value to the charity after you pass away. However, if you have this type of taxable gain, that would be nothing and you would be helping your favorite charity and not Uncle Sam!

Many people who are no longer looking for growth and are seeking income for retirement (while bypassing the cap. gain taxes and no longer having to manage the property) chose a Charitable Trust. They can also be formed after death minimizing estate taxes, etc. Personally, I know of a 40,000,000 CRT. They are a perfect way to get off the 1031 merry-go-round.

Check with an experienced estate planning attorney/firm or a large national charity for more information.

Concerning Private Annuity Trusts, I heard they have been disallowed by the I.R.S. (However, please confirm this.)

[luchabee]

Next time, before selling this type of appreciated property, you may want to consider a Charitable Remainder Trust (CRT), especially if you are older.

The Charitable Remainder Trust is the ONLY vehicle that will allow you to completely bypass all capital gains tax due on the sale of property. In return, you will receive an income stream based on the appraised value of the property before the sale, a substantial charitable deduduction to offset taxes, and you will be able to benefit your favorite charity or charities after you pass away.

They are very flexible. The only real “downside” is that you must leave at least 10 percent of the initial appraised value to the charity after you pass away. However, if you have this type of taxable gain, that would be nothing and you would be helping your favorite charity and not Uncle Sam!

Many people who are no longer looking for growth and are seeking income for retirement (while bypassing the cap. gain taxes and no longer having to manage the property) chose a Charitable Trust. They can also be formed after death minimizing estate taxes, etc. Personally, I know of a 40,000,000 CRT. They are a perfect way to get off the 1031 merry-go-round.

Check with an experienced estate planning attorney/firm or a large national charity for more information.

Concerning Private Annuity Trusts, I heard they have been disallowed by the I.R.S. (However, please confirm this.)

[nostradamus]

If you buy another property the depreciation is tax deductible. This leans in favor of buying, but just be smart when you buy.

BTW why didn’t you resolve this before you sold the property?

[nostradamus]

If you buy another property the depreciation is tax deductible. This leans in favor of buying, but just be smart when you buy.

BTW why didn’t you resolve this before you sold the property?

[HLS]

To say that the “depreciation is tax deductible” is very misleading…
Your cost basis of the sold property is transferred to the acquired property. You do NOT get to write off more depreciation of the new property based on the selling price, (up to an equal amount) It’s still based on your original cost.

Eventually depreciation is recaptured and figured in cost basis.

By buying out of state, depreciation can be much better, as the land value is low in many places, sometimes only 15% of the assessed value, while in CA it can be 50% or more.

Doing a 1031 in that situation can be a bit tricky, but still should be able to be done.

[HLS]

To say that the “depreciation is tax deductible” is very misleading…
Your cost basis of the sold property is transferred to the acquired property. You do NOT get to write off more depreciation of the new property based on the selling price, (up to an equal amount) It’s still based on your original cost.

Eventually depreciation is recaptured and figured in cost basis.

By buying out of state, depreciation can be much better, as the land value is low in many places, sometimes only 15% of the assessed value, while in CA it can be 50% or more.

Doing a 1031 in that situation can be a bit tricky, but still should be able to be done.

[SD Realtor]

luchabee I thought they may have been taken away from us by the IRS… poop… oh well. So yeah that would leave a CRT as the only viable alternative…..

Again in this case it is of no matter because the seller already has sold the property…. oh well… good post and thanks for that.

Original poster, guys like Surveyor and 4plexowner may have some good out of state recommendations for you for some of the markets they are looking in.

SD Realtor

[SD Realtor]

luchabee I thought they may have been taken away from us by the IRS… poop… oh well. So yeah that would leave a CRT as the only viable alternative…..

Again in this case it is of no matter because the seller already has sold the property…. oh well… good post and thanks for that.

Original poster, guys like Surveyor and 4plexowner may have some good out of state recommendations for you for some of the markets they are looking in.

SD Realtor

[Author]

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