sale of principal residence less than 2 years.

Dear 1031x.com: Recently divorced, sold primary residence where I lived under 2  yrs, will received capital gain (split of profit of approx $160K) of $80K,  will I have any tax implications since I sold this property under 2 yrs?  Your 1031 rep told me today that if primary residence, living at least 1  yr in it, and capital gain under $250K, I will not have any tax  implications, is that correct? I thought there was a minimum of 2 yrs with  penalty fee if sold before 2 yrs.

The IRS has issued taxpayer friendly regulations which state that in the event of unforeseen circumstances sale of principal residence in less than two years will still qualify for the section 121 exclusion. Divorce is one of these unforeseen circumstances.  See temp. reg. 1.121-3T(e)(1).  Sincerely,

Steve Hickox
Attorney / President

1031x.com has grown to provide many services to our clients as Castle United!
Click here:  http://www.CastleUnited.com/

1031x.com, Inc.
2120 S. Birch St.
Denver, CO 80222
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012

infox@1031xcastle.com

1031 exchange real estate professional as investor

Dear Steve: First of all, I would like to thank you for answering my question.  My  wife and I are planning to go into real estate investing (both residential 
and commercial)    In consultation with our accountant, he mentioned that we  cannot do a '1031 exchange' if my wife is a 'real estate professional'.  The profit we get from selling a property will be taxed as a capital gain.  Is this true that the 1031 exchange only reserved for 'real estate  investors'?  I haven't heard of this and wonder if you can shed a light on  this issue. Thank you,

 

Dear K: If your wife wants to do 1031 exchanges she simply needs to conduct two separate businesses.  Certainly many real estate professionals are also real estate investors (doing 1031 exchanges).  She must just keep good records and keep the two businesses separate.  Sincerely,

Steve Hickox
Attorney / President

1031x.com has grown to provide many services to our clients as Castle United!
Click here:  http://www.CastleUnited.com/

1031x.com, Inc.
2120 S. Birch St.
Denver, CO 80222
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012

infox@1031xcastle.com

1031 exchange military service

Hello,
 I have been in the military and I'm about to retire 1 Sep.  I have a home 
in Missouri that I have owned since 1996.  We received orders to Hawaii 
and have been renting the house since 2001.  Are there any areas that can 
save on the amount of capitol gains I will have to pay since I was active 
duty military?  Thanks in advance.

Dear Mr. P:  You converted your home to investment property back in 2001.  You have held it for investment for 7 years.  To my knowledge there is no special tax treatment in this area for military vs. non-military.  You may sell the property and following the rules of section 1031 repurchase a new investment property without tax liability.  This is your only good option for not paying tax on your gain.  We coach people through this process.  I hope you will let us do that for you.  Sincerely,

Steve Hickox
Attorney / President

1031x.com has grown to provide many services to our clients as Castle United!
Click here:  http://www.CastleUnited.com/

1031x.com, Inc.
2120 S. Birch St.
Denver, CO 80222
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012

infox@1031xcastle.com

1031 exchange property swap

Steve,

 

I have property that has been purchased through a 1031 exchange, 140 acres for $110,000 roughly.  I will be trading for some commercial land, 25 acres for the same value.  How will this work?  Thanks again.

 

Dear S:  If the properties are or equal value and equal equity they can be swapped with both parties completing 1031 exchanges and possibly without the need of an escrow service like ours.  Sincerely,

Steve Hickox
Attorney / President

1031x.com has grown to provide many services to our clients as Castle United!
Click here:  http://www.CastleUnited.com/

1031x.com, Inc.
2120 S. Birch St.
Denver, CO 80222
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012

infox@1031xcastle.com

IRC section 121 tax exemption

Dear Steve: Regarding capital gains tax on the sale of a second home in New  Jersey. How long do we have to sell this home to avoid paying capital gains tax?  We are now (since Jan'07) residents of FL. Thanks for your help.

Dear J:  From your question I gather that you had the home in NJ as your principal residence until January 2007.  After that you made Florida your principal residence.  In order to qualify for tax exemption under IRC section 121 you must have owned and lived in the home for 2 out of the last five years.  For you that will no longer be true in January 2010.  Therefore you have 18 months in which to sell the NJ property and still qualify for the exemption.  Sincerely,

Steve Hickox
Attorney / President

1031x.com has grown to provide many services to our clients as Castle United!
Click here:  http://www.CastleUnited.com/

1031x.com, Inc.
2120 S. Birch St.
Denver, CO 80222
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012

infox@1031xcastle.com

1031 exchange foreign capital gains

Dear 1031x.com: I  am about to sell a lot I own in Mexico and I am subject to  Mexican Capital Gains taxes, do I also have to pay taxes on the capital  gains in the USA?

Dear J:  The general rule is that if you pay capital gains tax in another country you will receive credit for that amount on your US income tax. If US tax rates are higher then you will first pay over seas and then pay the difference to the US.  Sincerely,

Steve Hickox
Attorney / President

1031x.com has grown to provide many services to our clients as Castle United!
Click here:  http://www.CastleUnited.com/

1031x.com, Inc.
2120 S. Birch St.
Denver, CO 80222
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012

infox@1031xcastle.com

swap of real estate 1031 exchange

Mr. Hickox,

 

I am a customer of 1031X and may be utilizing your firm again soon on a pending sale.  I also have a question on the property that I did purchase under 1031 in 2005.  I may trade some of this land, with no money being transferred,  Can I roll my 1031 status on this new property to keep my tax deferred status?

 

Thanks.

Dear S:  Yes you can swap real estate of equal value with another exchanger and each of you will be doing a 1031 exchange.  Remember the properties must be of equal value and not just equal equity if you are both going to get complete tax deferral.  You might want to give me more detail of your particular transaction to be sure.  Sincerely

Steve Hickox
Attorney / President

1031x.com has grown to provide many services to our clients as Castle United!
Click here:  http://www.CastleUnited.com/

1031x.com, Inc.
2120 S. Birch St.
Denver, CO 80222
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012

infox@1031xcastle.com

1031 exchange owner arry financing tax treatment

Dear 1031x.com If I were to owner finance a rental property being sold, How  does the capital gains tax work,  is it paid on the down payment only or  on the total sale price of property? And what about the principle that would be paid during the year, how would  it be taxed? 

 

Dear Jim:  Your question is answered in IRC section 453.  When you sell a property and carry back the financing you usually receive payments of principal and interest.  The interest is taxed like all interest received from all sources.  The principal portion will be divided into three pieces and will be taxed differently on each piece.  Each principal payment will be treated as 1) return of capital, 2) long term capital gains, and 3) recaptured depreciation.  #1 will not be taxed, #2 will be taxed at a certain rate and #3 will be taxed at a different rate.  I hope that this helps.  Remember doing owner carryback financing severely limits your ability to do a 1031 exchange.  Please contact us for further elucidation.  Sincerely,

Steve Hickox
Attorney / President

1031x.com has grown to provide many services to our clients as Castle United!
Click here:  http://www.CastleUnited.com/

1031x.com, Inc.
2120 S. Birch St.
Denver, CO 80222
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012

infox@1031xcastle.com

1031 exchange lease option extend time

Dear 1031x,

 

I currently own an aircraft that I would like to sell and currently have an interested party.  I have recently made an offer on a contract for a new aircraft that will deliver new from the manufacturer in about 8 months.  I would like to do a 1031 exchange, but the period of time from the sell of the current aircraft and the delivery of the new aircraft will exceed the 180 day rule.  Would leasing out my current aircraft with an option for the buyer to purchase once I'm within the 180 day requirement preserve the ability to do a 1031?

 

Thanks,

Dear B:  Using a lease option is the right solution here.  Remember make it a true lease option and not is disguised sale.  S.

Steve Hickox
Attorney / President

1031x.com has grown to provide many services to our clients as Castle United!
Click here:  http://www.CastleUnited.com/

1031x.com, Inc.
2120 S. Birch St.
Denver, CO 80222
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012

infox@1031xcastle.com

1031 exchange and partnership interests

Dear 1031x.com: When a partnership sells a property and one of the three  partners does a 1031 exchange with his share, how is the exchange  reported?  On the partners K-1?

Dear C:  IRC section 1031 specifically excludes partnership interests from tax deferral under that section.  The best way to accomplish what you seek is probably as follows:  The partner wishing to exchange withdraws from the partnership and receives a deed to the property being sold from the partnership for his fractional interest in the property.  When the property sells the partner receives its interest in cash and the co-owner (former partner) performs a 1031 exchange.  Does this work in your case?  Sincerely,

Steve Hickox
Attorney / President

1031x.com has grown to provide many services to our clients as Castle United!
Click here:  http://www.CastleUnited.com/

1031x.com, Inc.
2120 S. Birch St.
Denver, CO 80222
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012

infox@1031xcastle.com

1031 exchange and earnest money

Dear 1031x.com We have some earnest money coming in for a land sale. Do we need  to identify a like-exchange for that, or can it sit in an escrow account  until the property closes?

Dear B:  The earnest money is not really proceeds from the sale of real estate yet.  Only such proceeds need be put in a 1031 escrow.  In short the earnest money can really be held any way until it becomes proceeds from a sale.  Sincerely, 

Steve Hickox
Attorney / President

1031x.com has grown to provide many services to our clients as Castle United!
Click here:  http://www.CastleUnited.com/

1031x.com, Inc.
2120 S. Birch St.
Denver, CO 80222
303.504.0144
Toll Free 888.899.1031
Fax 303.715.1012

infox@1031xcastle.com