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Question About Rolling Proceeds From A Condo Sale Into Another Property
Posted on 7/11/24 at 10:06 am
Posted on 7/11/24 at 10:06 am
Kids are all about to be done with school in Auburn so we plan to sell our condo there within the next few years. Don’t need those proceeds for anything, so thinking of rolling all of the proceeds into a beach house for rental purposes. So, will we have to pay capital gains on the sell of the Auburn condo even if we immediately roll the funds into the purchase of a rental property?
8
Posted on 7/11/24 at 10:08 am to auwaterfowler
1031 exchange. Lots of companies specialize in it. You will need them to guide you through the process. I believe you have 180 days from date of sale to buy (or identify property maybe - not exactly my expertise).
eta do it before the government nukes it
eta do it before the government nukes it
This post was edited on 7/11/24 at 10:10 am
Posted on 7/11/24 at 10:23 am to auwaterfowler
quote:
1031 exchange.
Like the above said. You will pay no taxes. Learn, get help from a professional and be smart.
Posted on 7/11/24 at 1:06 pm to I Love Bama
quote:
get help from a professional
If you were renting out the condo to strangers, yes, definitely qualifies for 1031
Your kids living there rent free...maybe not.
Check with a tax pro
Posted on 7/11/24 at 1:13 pm to auwaterfowler
The main thing with 1031 is you can’t take possession of the money at any point. Set it up before the sale and have another purchase identified.
I also personally learned if you are doing an equal swap of titles with no money involved you don’t have to do anything other than file a form with the IRS.
I also personally learned if you are doing an equal swap of titles with no money involved you don’t have to do anything other than file a form with the IRS.
This post was edited on 7/11/24 at 1:24 pm
Posted on 7/11/24 at 2:40 pm to texn
quote:
If you were renting out the condo to strangers, yes, definitely qualifies for 1031
Your kids living there rent free...maybe not.
This. I'm assuming the kids paid rent of some sort?
If your own kids didn't pay rent and you were losing some money, I'd be interested how a CPA would run with it.
Posted on 7/11/24 at 3:08 pm to lsujro
quote:
eta do it before the government nukes it
Posted on 7/11/24 at 3:27 pm to lsujro
quote:
1031 exchange. Lots of companies specialize in it. You will need them to guide you through the process. I believe you have 180 days from date of sale to buy (or identify property maybe - not exactly my expertise).
eta do it before the government nukes it
To close it, have to identify a property much faster than that.
Posted on 7/11/24 at 3:29 pm to Billy Blanks
Also, this *defers* the gain owed, it doesn't disappear. If future property is sold not via 1031, would owe the deferred tax at that juncture.
Posted on 7/11/24 at 4:39 pm to Billy Blanks
1031 only applies to investment properties so hopefully kids or there friends paid rent and you reported it.
Use a qualified intermediary as they will make sure you do it correctly. If you don’t cross every t and dot every i, no 1031 exchange.
45 days to identify a property after close of original, and 180 days to close on secondary.
Very important note: this does not keep you from paying taxes, you just kick the tax bill down the road and pay it when it you sell the property that no longer qualifies for a 1031.
Eta: all points have been covered.
Use a qualified intermediary as they will make sure you do it correctly. If you don’t cross every t and dot every i, no 1031 exchange.
45 days to identify a property after close of original, and 180 days to close on secondary.
Very important note: this does not keep you from paying taxes, you just kick the tax bill down the road and pay it when it you sell the property that no longer qualifies for a 1031.
Eta: all points have been covered.
This post was edited on 7/11/24 at 4:40 pm
Posted on 7/11/24 at 4:51 pm to auwaterfowler
Thanks to all for the input. Good stuff.
Posted on 7/11/24 at 5:19 pm to auwaterfowler
Jule Herbert...Gulf Shores
Posted on 7/11/24 at 9:43 pm to Billy Blanks
quote:
Also, this *defers* the gain owed, it doesn't disappear. If future property is sold not via 1031, would owe the deferred tax at that juncture
One benefit of a 1031 is that while you do defer the tax on the first property, not eliminate it, you do convert the depreciation recapture income (taxed at ordinary rates up to 25%) to long term capital gains (taxed at the qualified rates).
Posted on 7/11/24 at 9:45 pm to baldona
quote:
If your own kids didn't pay rent and you were losing some money, I'd be interested how a CPA would run with it.
Was the rental being reported? If it was, and if the rent was reasonable, then I think most CPAs are fine with it, but if not, probably not.
What you would not want to see is the taxpayer claiming interest deductions / property taxes on Sch A as a second property.
Posted on 7/12/24 at 8:24 am to lsujro
1031. 45 days to identify new property and 180 to close from date of sale of original property
Posted on 7/12/24 at 8:40 am to MSTiger33
quote:
1031. 45 days to identify new property and 180 to close from date of sale of original property
Can someone explain where these dates came from? I've bought my fair share of rentals but never a 1031, so maybe I'm missing something. But its a hell of a lot harder to find a rental to purchase than to close on it. I don't understand the spread on these days, should be something like 90 and 90 or more likely 150 to identify and 60 to close.
Posted on 7/12/24 at 9:04 am to LSUFanHouston
quote:
One benefit of a 1031 is that while you do defer the tax on the first property, not eliminate it, you do convert the depreciation recapture income (taxed at ordinary rates up to 25%) to long term capital gains (taxed at the qualified rates).
Damn, never knew this. This is permanent right? No deferral or any other details?
If you sell a property for more than you paid for it that's huge on the increased value if you are higher income
Posted on 7/12/24 at 3:11 pm to auwaterfowler
Fill out return and at the bottom sign "Charge it to the Game"
Posted on 7/12/24 at 9:12 pm to baldona
quote:
Can someone explain where these dates came from?
Ummmmm, 26 US Code 1031,
Posted on 7/12/24 at 9:35 pm to baldona
quote:
Damn, never knew this. This is permanent right? No deferral or any other details?
It's been part of 1031 forever, which is always being threatened by some in congress...
Buy Condo for $200K. Take $30K depreciation. Sell for $250K.
You will have $50K at cap gain rates and $30K at ordinary rates for depreciation recapture (capped at 25%).
Instead, you 1031 into a new property cost of $310K. You take a basis in the new property of $230K (310K price less $80K deferred gain). Depreciation on new property based on that $230K. Take $50K depr on new property, and sell for $400K, don't do another exchange.
On the second sale, you will have $50K ord rates and $170K cap gain rates. The $170K is the $80K deferred from first property plus the $90K market gain in the new property ($400K less $310K ourchase price).
You save a few points in tax rate on the original $30K recapture. Not taking huge amounts, but no one laughs off tax savings...
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