Suggestions needed: should we pay Capital Gain tax this year or do 103x?

[jennifer1234]

We almost decided to defer the capital gain tax we incurred last year. However, we are having some last minute doubts, considering the presidential election and the almost certain tax rate increase down the road.

Here is the situation:

1. We are at the highest tax bracket.

2. Our investment (if 1031) timeframe is 10 years or longer.

3. We will invest in something sooner or later — regardless 103x or not.

Our CPA’s suggestion is to pay the capital gain tax now if we expect to invest less than 10 years. Otherwise defer it.

Obviously time is of essense. Appreciate your timely thoughts, suggestions, ideas…

Thanks,

Jennifer

[EconProf]

BobS
Capital gains tax will likely go up from current 15% federal to 25%+ under a Democrat; may even go up under McCain, but perhaps only to 18 – 20%.
Paying it now under current tax rate has its advantages:
Lower rate now, plus you are not compelled to rush into a perhaps misguided upleg purchase with their strict deadlines, pressure to buy, etc.
Don’t forget that CA has one of the harshest treatments of cap gains in the nation. I just sold a commercial property I held for 25 years. Sheltered some of the proceeds with a 1031 for some of the gains. Still paid plenty to the feds and about 2/3 that amount to the state.
Your decision should rest upon your view of the market in the time frame you would hold the upleg, your view of today’s and tomorrow’s interest rates, etc. This is a big decision, and worth a session with your accountant.

[EconProf]

BobS
Capital gains tax will likely go up from current 15% federal to 25%+ under a Democrat; may even go up under McCain, but perhaps only to 18 – 20%.
Paying it now under current tax rate has its advantages:
Lower rate now, plus you are not compelled to rush into a perhaps misguided upleg purchase with their strict deadlines, pressure to buy, etc.
Don’t forget that CA has one of the harshest treatments of cap gains in the nation. I just sold a commercial property I held for 25 years. Sheltered some of the proceeds with a 1031 for some of the gains. Still paid plenty to the feds and about 2/3 that amount to the state.
Your decision should rest upon your view of the market in the time frame you would hold the upleg, your view of today’s and tomorrow’s interest rates, etc. This is a big decision, and worth a session with your accountant.

[EconProf]

BobS
Capital gains tax will likely go up from current 15% federal to 25%+ under a Democrat; may even go up under McCain, but perhaps only to 18 – 20%.
Paying it now under current tax rate has its advantages:
Lower rate now, plus you are not compelled to rush into a perhaps misguided upleg purchase with their strict deadlines, pressure to buy, etc.
Don’t forget that CA has one of the harshest treatments of cap gains in the nation. I just sold a commercial property I held for 25 years. Sheltered some of the proceeds with a 1031 for some of the gains. Still paid plenty to the feds and about 2/3 that amount to the state.
Your decision should rest upon your view of the market in the time frame you would hold the upleg, your view of today’s and tomorrow’s interest rates, etc. This is a big decision, and worth a session with your accountant.

[EconProf]

BobS
Capital gains tax will likely go up from current 15% federal to 25%+ under a Democrat; may even go up under McCain, but perhaps only to 18 – 20%.
Paying it now under current tax rate has its advantages:
Lower rate now, plus you are not compelled to rush into a perhaps misguided upleg purchase with their strict deadlines, pressure to buy, etc.
Don’t forget that CA has one of the harshest treatments of cap gains in the nation. I just sold a commercial property I held for 25 years. Sheltered some of the proceeds with a 1031 for some of the gains. Still paid plenty to the feds and about 2/3 that amount to the state.
Your decision should rest upon your view of the market in the time frame you would hold the upleg, your view of today’s and tomorrow’s interest rates, etc. This is a big decision, and worth a session with your accountant.

[EconProf]

BobS
Capital gains tax will likely go up from current 15% federal to 25%+ under a Democrat; may even go up under McCain, but perhaps only to 18 – 20%.
Paying it now under current tax rate has its advantages:
Lower rate now, plus you are not compelled to rush into a perhaps misguided upleg purchase with their strict deadlines, pressure to buy, etc.
Don’t forget that CA has one of the harshest treatments of cap gains in the nation. I just sold a commercial property I held for 25 years. Sheltered some of the proceeds with a 1031 for some of the gains. Still paid plenty to the feds and about 2/3 that amount to the state.
Your decision should rest upon your view of the market in the time frame you would hold the upleg, your view of today’s and tomorrow’s interest rates, etc. This is a big decision, and worth a session with your accountant.

[SD Realtor]

Jennifer this is a tough one without having a look at all the cards on the table. For instance, many people believe that a balanced portfolio is a cornerstone for investing. A mix of securities, perhaps bonds as well, some real estate, etc… So your question is one that is very narrow but the answer could depend on alot of other factors including your overall strategy. Will your tax bracket be the same in 10 or 20 years as it is now? It sounds like you already sold the property? Had you already identified the 1031 property you want to exchange into? Is the money with an accomodator? My point is that if you have already done the sale but have not stored the money with an accomodator then the decision is already made, you must take the tax gain.

The other issue at hand is what would your 1031 strategy be? Are you looking at buying a single family home? a condo? multiple properties? Would you be looking for appreciation or income?

There are way to many questions to give you a qualified answer. Without knowing all the factors involved my advice would be to listen to your CPA. Sounds like he has been doing a good job these many years especially if you are in the highest tax bracket.

[SD Realtor]

Jennifer this is a tough one without having a look at all the cards on the table. For instance, many people believe that a balanced portfolio is a cornerstone for investing. A mix of securities, perhaps bonds as well, some real estate, etc… So your question is one that is very narrow but the answer could depend on alot of other factors including your overall strategy. Will your tax bracket be the same in 10 or 20 years as it is now? It sounds like you already sold the property? Had you already identified the 1031 property you want to exchange into? Is the money with an accomodator? My point is that if you have already done the sale but have not stored the money with an accomodator then the decision is already made, you must take the tax gain.

The other issue at hand is what would your 1031 strategy be? Are you looking at buying a single family home? a condo? multiple properties? Would you be looking for appreciation or income?

There are way to many questions to give you a qualified answer. Without knowing all the factors involved my advice would be to listen to your CPA. Sounds like he has been doing a good job these many years especially if you are in the highest tax bracket.

[SD Realtor]

Jennifer this is a tough one without having a look at all the cards on the table. For instance, many people believe that a balanced portfolio is a cornerstone for investing. A mix of securities, perhaps bonds as well, some real estate, etc… So your question is one that is very narrow but the answer could depend on alot of other factors including your overall strategy. Will your tax bracket be the same in 10 or 20 years as it is now? It sounds like you already sold the property? Had you already identified the 1031 property you want to exchange into? Is the money with an accomodator? My point is that if you have already done the sale but have not stored the money with an accomodator then the decision is already made, you must take the tax gain.

The other issue at hand is what would your 1031 strategy be? Are you looking at buying a single family home? a condo? multiple properties? Would you be looking for appreciation or income?

There are way to many questions to give you a qualified answer. Without knowing all the factors involved my advice would be to listen to your CPA. Sounds like he has been doing a good job these many years especially if you are in the highest tax bracket.

[SD Realtor]

Jennifer this is a tough one without having a look at all the cards on the table. For instance, many people believe that a balanced portfolio is a cornerstone for investing. A mix of securities, perhaps bonds as well, some real estate, etc… So your question is one that is very narrow but the answer could depend on alot of other factors including your overall strategy. Will your tax bracket be the same in 10 or 20 years as it is now? It sounds like you already sold the property? Had you already identified the 1031 property you want to exchange into? Is the money with an accomodator? My point is that if you have already done the sale but have not stored the money with an accomodator then the decision is already made, you must take the tax gain.

The other issue at hand is what would your 1031 strategy be? Are you looking at buying a single family home? a condo? multiple properties? Would you be looking for appreciation or income?

There are way to many questions to give you a qualified answer. Without knowing all the factors involved my advice would be to listen to your CPA. Sounds like he has been doing a good job these many years especially if you are in the highest tax bracket.

[SD Realtor]

Jennifer this is a tough one without having a look at all the cards on the table. For instance, many people believe that a balanced portfolio is a cornerstone for investing. A mix of securities, perhaps bonds as well, some real estate, etc… So your question is one that is very narrow but the answer could depend on alot of other factors including your overall strategy. Will your tax bracket be the same in 10 or 20 years as it is now? It sounds like you already sold the property? Had you already identified the 1031 property you want to exchange into? Is the money with an accomodator? My point is that if you have already done the sale but have not stored the money with an accomodator then the decision is already made, you must take the tax gain.

The other issue at hand is what would your 1031 strategy be? Are you looking at buying a single family home? a condo? multiple properties? Would you be looking for appreciation or income?

There are way to many questions to give you a qualified answer. Without knowing all the factors involved my advice would be to listen to your CPA. Sounds like he has been doing a good job these many years especially if you are in the highest tax bracket.

[Author]

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