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Pensacola Discussion Forum » General Discussion » Anyone here have experience using a 1031 tax exchange?

Anyone here have experience using a 1031 tax exchange?

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Joanimaroni
Markle
2seaoat
othershoe1030
8 posters

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othershoe1030

othershoe1030

I'm closing on a rental house Friday and showing a profit. Could reinvest or pay the capital gains. Any recommendations?

2seaoat



I have done in excess of 20 1031 exchanges. I do not recommend the same with the possibility of the wins by the democrats in 2016 which could see capital gains taxes increasing. A 1031 defers taxes, it does not eliminate the same. I can honestly say in my zest to avoid taxation, I made some horrible choices in 2005-2008.

If you have another rental home which interests you, then you declare that as your replacement property and do a simultaneous exchange. If you have not found a rental home, but think you can find one in the near future, you should contact a qualified intermediary to hold your proceeds from the sale of the first home. You cannot sell, take possession of the proceeds and buy another home.....this does not qualify. If it is local, please contact Reliable Title and they will tell you what their charges will be for a starker delayed exchange, and will have you execute the exchange documents.

othershoe1030

othershoe1030

2seaoat wrote:I have done in excess of 20 1031 exchanges.  I do not recommend the same with the possibility of the wins by the democrats in 2016 which could see capital gains taxes increasing.   A 1031 defers taxes, it does not eliminate the same.  I can honestly say in my zest to avoid taxation, I made some horrible choices in 2005-2008.

If you have another rental home which interests you, then you declare that as your replacement property and do a simultaneous exchange.  If you have not found a rental home, but think you can find one in the near future, you should contact a qualified intermediary to hold your proceeds from the sale of the first home.  You cannot sell, take possession of the proceeds and buy another home.....this does not qualify.  If it is local, please contact Reliable Title and they will tell you what their charges will be for a starker delayed exchange, and will have you execute the exchange documents.

I'm trying to simplify. Given that the exchange only defers payment I think as you say it is probably best to just go ahead and pay the taxes now. I thought the capital gains rate was a fixed rate but I'm reading that it is tied to a person's tax bracket based on regular, non capital gains income?

2seaoat



You are making a good decision. I feel the democrats have a 70% chance of having the senate, house, and presidency in 2016 and I predict a flat rate of at least 20-28% on capital gains as one of their first priorities to balance the budget and begin to lower the deficit. If you bought a replacement home, you would likely be paying 15% more tax on your gain than you would pay now. Smart money are rarely doing exchanges unless they have estate tax issues where they will try to gift the replacement property.

othershoe1030

othershoe1030

2seaoat wrote:You are making a good decision.  I feel the democrats have a 70% chance of having the senate, house, and presidency in 2016 and I predict a flat rate of at least 20-28% on capital gains as one of their first priorities to balance the budget and begin to lower the deficit.  If you bought a replacement home, you would likely be paying 15% more tax on your gain than you would pay now.  Smart money are rarely doing exchanges unless they have estate tax issues where they will try to gift the replacement property.

Thanks, that makes me feel better. What's the rate now? I thought it was tied to whatever bracket you were in re regular income.

othershoe1030

othershoe1030

Just found this on eHow

Taxpayers will pay a short-term tax rate on profits from the sale of rental houses owned a year or less and a long-term tax rate for property held more than a year. While short-term capital gains taxes match the taxpayers' regular income tax rates, long-term holdings allow rental home sellers a lower tax rate of either 0 or 15 percent, depending upon their regular income tax rate as of 2011. A taxpayer will not owe Social Security and Medicare taxes on his real estate gains, regardless of the timing of the sale.

Read more: http://www.ehow.com/info_12140468_gains-losses-selling-rental-houses.html#ixzz2xl4f5fsU

Markle

Markle

I find it extremely amusing that two people who think "rich" people should pay more taxes are discussing ways to defer taxes.

A 1031 exchange is an excellent way to defer taxes and increase your leverage in a new property.  It can be done for decades and then when you are retired sold usually at a lower tax rate.

Planning for the future, you can do a 1031 exchange for your future home where you want to retire.  Then rent it for a number of years before moving into the home.  You could own it free and clear at that point.  By moving into the home, as your permanent residence, you will not pay taxes until it is sold, and probably not then either.

In my opinion, and most investors, NOT using 1031 exchanges is foolish any time.

Anyone who was buying investment property during the run up in prices were fools.  They ignored facts and historic trends.  Many Realtors were the worse offenders.  They had not been in the business during down markets and foolishly believed prices were going to continue forever.

2seaoat



In my opinion, and most investors, NOT using 1031 exchanges is foolish any time.


Ah thank you. You have confirmed how utterly little you know about 1031. Having been a qualified intermediary, I can tell you 1031 volume has dropped to the point that few transactions are happening.

Now if a real estate market does not keep up with inflation, and in fact has the potential to drop in value, and there is a high likelihood of tax rates increasing.....what fool would do a 1031 exchange? You deal in nickle and dimes, but smart money all but stopped using them after 2008. The only place we are placing like kind exchanges are raw farm land, and that is an increasing valued asset with world markets, and the new returns on farm land far outstrip future capital gain increases where "qualified farm land" has many tax advantages.

Advising someone to like kind a small rental unit is utter idiocy, unless that person was facing alternative minimum tax issues or the market they were investing could be guaranteed to perform better than inflation.

Your advice is terrible, especially if you do not even know the capital gain rates currently which would have her paying hardly any tax.

2seaoat



Anyone who was buying investment property during the run up in prices were fools.

Now you think somebody is a fool not to buy replacement investment property.....you sir have no idea where commercial investment property is going, and your advise is utterly foolish.

Markle

Markle

Fewer people are doing 1031 exchanges since properties bought during the run up in prices are now posting losses for those same properties if they are forced to sell now.

2seaoat



Fewer people are doing 1031 exchanges since properties bought during the run up in prices are now posting losses for those same properties if they are forced to sell now.


Wrong again, if you knew anything about like kind exchanges and tax law you would understand the basis of the prior property transfers to the new property. In many cases multiple exchanges have the basis near zero, so even if the latest property is purchased and loses value, the sale of that property with accumulated depreciation on prior exchanged properties will show a profit which still could be deferred with a 1031, but people are choosing not to do the same. The main reason for the drop in 1031 exchanges is the belief that the taxes will increase on capital gains, and that property values will remain static or in fact drop in value when measured against inflation. Do you have any other bad advice to give?

othershoe1030

othershoe1030

Markle wrote:I find it extremely amusing that two people who think "rich" people should pay more taxes are discussing ways to defer taxes.

A 1031 exchange is an excellent way to defer taxes and increase your leverage in a new property.  It can be done for decades and then when you are retired sold usually at a lower tax rate.

Planning for the future, you can do a 1031 exchange for your future home where you want to retire.  Then rent it for a number of years before moving into the home.  You could own it free and clear at that point.  By moving into the home, as your permanent residence, you will not pay taxes until it is sold, and probably not then either.

In my opinion, and most investors, NOT using 1031 exchanges is foolish any time.

Anyone who was buying investment property during the run up in prices were fools.  They ignored facts and historic trends.  Many Realtors were the worse offenders.  They had not been in the business during down markets and foolishly believed prices were going to continue forever.

I knew you would find it amusing to see talk about taxes from me but I think this comes under the heading of just being responsible with my money? I've had the property for 16 years so I did not buy during the run-up.  Here's an interesting article I ran across while researching today.

http://www.bankrate.com/finance/taxes/no-capital-gains-due-for-some-investors-1.aspx

2seaoat



Do you think Mr. Markle thinks you are foolish to not do a 1031......I wonder if he even understands current capital gains and how they apply to you. It is quite enjoyable when the curtain is pulled back and someone shows their butt.

Guest


Guest

Pick one,,, or two..

1 YES

2 NO

3 Maybe

4 None of above

5 All of Above

6 What Oats says

7 What Marle says

8 Ask someone who knows.

2seaoat



Number six you silly person.....number six. There are rarely other choices.

Markle

Markle

othershoe1030 wrote:
Markle wrote:I find it extremely amusing that two people who think "rich" people should pay more taxes are discussing ways to defer taxes.

A 1031 exchange is an excellent way to defer taxes and increase your leverage in a new property.  It can be done for decades and then when you are retired sold usually at a lower tax rate.

Planning for the future, you can do a 1031 exchange for your future home where you want to retire.  Then rent it for a number of years before moving into the home.  You could own it free and clear at that point.  By moving into the home, as your permanent residence, you will not pay taxes until it is sold, and probably not then either.

In my opinion, and most investors, NOT using 1031 exchanges is foolish any time.

Anyone who was buying investment property during the run up in prices were fools.  They ignored facts and historic trends.  Many Realtors were the worse offenders.  They had not been in the business during down markets and foolishly believed prices were going to continue forever.

I knew you would find it amusing to see talk about taxes from me but I think this comes under the heading of just being responsible with my money? I've had the property for 16 years so I did not buy during the run-up.  Here's an interesting article I ran across while researching today.

http://www.bankrate.com/finance/taxes/no-capital-gains-due-for-some-investors-1.aspx

Easily it could be a moot point. You had to identify the property you are selling as part of a 1031 exchange in the contract.

Talk to your CPA. Some people like to pay taxes, I would rather let that money work for me as long as possible.

2seaoat



Easily it could be a moot point. You had to identify the property you are selling as part of a 1031 exchange in the contract.

Wrong again. A simple novation on the day of the closing and signing the qualified intermediary agreement would allow her to do it at the closing. The purchaser simply has to sign the novation, and the 1031 docs. Keep up the good advice.

Markle

Markle

2seaoat wrote:Easily it could be a moot point. You had to identify the property you are selling as part of a 1031 exchange in the contract.

Wrong again.  A simple novation on the day of the closing and signing the qualified intermediary agreement would allow her to do it at the closing.  The purchaser simply has to sign the novation, and the 1031 docs.  Keep up the good advice.

I said it "EASILY COULD BE A MOOT POINT".

I advised him to see his CPA. You did not. Keep up the good advice.

Now we'll see 2seaoat put in the last word.

Joanimaroni

Joanimaroni

Markle wrote:I find it extremely amusing that two people who think "rich" people should pay more taxes are discussing ways to defer taxes.

A 1031 exchange is an excellent way to defer taxes and increase your leverage in a new property.  It can be done for decades and then when you are retired sold usually at a lower tax rate.

Planning for the future, you can do a 1031 exchange for your future home where you want to retire.  Then rent it for a number of years before moving into the home.  You could own it free and clear at that point.  By moving into the home, as your permanent residence, you will not pay taxes until it is sold, and probably not then either.

In my opinion, and most investors, NOT using 1031 exchanges is foolish any time.

Anyone who was buying investment property during the run up in prices were fools.  They ignored facts and historic trends.  Many Realtors were the worse offenders.  They had not been in the business during down markets and foolishly believed prices were going to continue forever.

I find it amusing and hypocritical that a prudent democrat is scrambling around to find ways to hide her capital gains before her party......the Dems....can do more damage .

Floridatexan

Floridatexan

Joanimaroni wrote:
Markle wrote:I find it extremely amusing that two people who think "rich" people should pay more taxes are discussing ways to defer taxes.

A 1031 exchange is an excellent way to defer taxes and increase your leverage in a new property.  It can be done for decades and then when you are retired sold usually at a lower tax rate.

Planning for the future, you can do a 1031 exchange for your future home where you want to retire.  Then rent it for a number of years before moving into the home.  You could own it free and clear at that point.  By moving into the home, as your permanent residence, you will not pay taxes until it is sold, and probably not then either.

In my opinion, and most investors, NOT using 1031 exchanges is foolish any time.

Anyone who was buying investment property during the run up in prices were fools.  They ignored facts and historic trends.  Many Realtors were the worse offenders.  They had not been in the business during down markets and foolishly believed prices were going to continue forever.

I find it amusing and hypocritical that a prudent democrat is scrambling around to find ways to hide her capital gains before her party......the Dems....can do more damage .


I think it's appalling that you consider yourself in a position to judge her.

Joanimaroni

Joanimaroni

Floridatexan wrote:
Joanimaroni wrote:
Markle wrote:I find it extremely amusing that two people who think "rich" people should pay more taxes are discussing ways to defer taxes.

A 1031 exchange is an excellent way to defer taxes and increase your leverage in a new property.  It can be done for decades and then when you are retired sold usually at a lower tax rate.

Planning for the future, you can do a 1031 exchange for your future home where you want to retire.  Then rent it for a number of years before moving into the home.  You could own it free and clear at that point.  By moving into the home, as your permanent residence, you will not pay taxes until it is sold, and probably not then either.

In my opinion, and most investors, NOT using 1031 exchanges is foolish any time.

Anyone who was buying investment property during the run up in prices were fools.  They ignored facts and historic trends.  Many Realtors were the worse offenders.  They had not been in the business during down markets and foolishly believed prices were going to continue forever.

I find it amusing and hypocritical that a prudent democrat is scrambling around to find ways to hide her capital gains before her party......the Dems....can do more damage .


I think it's appalling that you consider yourself in a position to judge her.



Judging ? No, i'm not judging, I simply made an observation and commented..... I'll leave the judging to the posters that feel a need to label, insult the intelligence, and resort to name calling entire groups of people.... adversaries.

2seaoat



Judging ? No, i'm not judging, I simply made an observation and commented..... I'll leave the judging to the posters that feel a need to label, insult the intelligence, and resort to name calling entire groups of people.... adversaries.


Hmmmmmm.........judging or an observation.....welcome to the dick club.

Joanimaroni

Joanimaroni

2seaoat wrote:Judging ? No, i'm not judging, I simply made an observation and commented..... I'll leave the judging to the posters that feel a need to label, insult the intelligence, and resort to name calling entire groups of people.... adversaries.


Hmmmmmm.........judging or an observation.....welcome to the dick club.

And would you be the head dick?

Sal

Sal

Joanimaroni wrote:
And would you be the head dick?

Are you the head nurse?

Joanimaroni

Joanimaroni

Sal wrote:
Joanimaroni wrote:
And would you be the head dick?

Are you the head nurse?

Lol...touché.

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