Defering capital gain tax

[DREK]

hello guys

I’ve heard a few people talk about deferring capital gain tax.  Im not really sure of how the whole process goes down.  It is my understanding that you can roll all or some of your capital gain from property A into a like investment property.  Is this somthing that needs to be set up at the closing of the first property, or just another form to fill out when filing taxes?  If anybodys been down this road i'd love to hear your input.

Thanks Derek

[Clayton]

It's called a 1031 Exchange or Like Property Exchange.  Your accountant can help you with all of the details.  But basically you can defer any taxes due on the sale of one property, if you identify a like property that you will roll the money into within I believe 45 days, and close within 90 or 180 days.  You will need to have an escrow company hold this money until the next purchase, which has a small fee as well, I believe.  You will continue to roll the taxes to give you more buying power, but in the end you will be required to pay the tax when you sell and do not exchange.  The details of that I don't know.

Do a google search for 1031 Exchange and you'll find anything and everything you've wanted to know.  Also, if you find anything that may be beneficial to everyone.  Please post it.

-c

[Clayton]

I have done a quick search, and found a decent article describing the process.  I have posted it to our Investors Choice Blog http://www.investorschoiceindy.com/blog

Hopefully this will clear a little bit up as well.  It's a very useful tool, but from what I've heard in the past, the property value needs to be over X to make it worth while due to cost and its requirements.  just my opinion

-c

[Brian Lee]

What Clay is saying is pretty much true.  The only thing I would add to it is that the 1031 exchange has to be completed through a "qualified intermediary".  There are third party companies that do that and some title companies will handle that part for you.  There are many rules, but on our level, they are pretty easy to follow.  The larger commercial type deals are where it can get more complicated, but the rules are same for all deals.  This would be a good topic for one of our IC meetings in the future when we have more properties being sold as there are several benefits in "trading up" to more or larger income producing properties.  If anyone has more interest, let me know.
-B

[kmac]

Yes! I think this would be a great topic for our next meeting!  Thank you, oh great leader.

Is our electricity on yet?  Jeez...

[Brian Lee]

Why don't you pipe down up there!?!    And thanks for ruining a surprise.  I am working on an IC meeting very soon with a 1031 exchange company to talk with everyone about this very topic.

...and talk to your husband about the electricity.  I did my part.  I'm tired of being blamed for his mess ups.