Real Estate Sale Taxes

[Horn_Spanker 524]

What kind of taxes would I be liable for and how to reduce them as much as possible on the following situation?

I own a piece of a property with other relatives.  (Grandparents old house)  It's needing some major work and I don't want to put any money into it.  I told the other cousins that I'd like to sell or they could buy out my %.  A cousin is interested in buying me out.  So, if no real estate professional is involved and he's willing to wright a check,  how to I minimize my taxes?

[TwiceHorn 31512]

(cost or value at acquisition)/number of owners = cost basis

(sale price of share - cost basis) x capital gain tax rate = your taxation

Costs of sale (realtor, lawyer, etc) add to cost basis.  If it was inherited, it was probably assigned a value during the probate and on the Estate Tax Return, and you are probably stuck with that.  Otherwise, you might be able to fudge it upward a little. Minimizing your taxes would involve some lyin, if not outright fraud.

Edited February 28, 2019 by TwiceHorn

[luke duke 6413]

I know a guy if you’re trying to make a $50MM golf course worth $5MM.

[Bernard 879]

Has the property appreciated a lot since you inherited it? As touched on above, your basis is the value at the time of inheritance. There’s no special technique to avoid taxes. 

Bernard

[akhornfan 4]

Do a 1031

[3adays 454]

As an executor of an estate I had to sell a home last year. The proceeds were put into a trust for his daughter. Home went for about 150K. Any idea what the tax bill for the estates will be? 

Edited March 3, 2019 by 3adays
Shitty wording

[HouTex 1887]

So the parent and the daughter are dead?

[Sbbruin 21865]

Wright?

[3adays 454]

1 hour ago, HouTex said:

So the parent and the daughter are dead?

Nah, he dead. She alive. Fixed it. 

[HouTex 1887]

Nah, he dead. She alive. Fixed it. 

Get an accountant. The executor (you?) should have valued the house as part of the estate administration. If it sold for a gain and the income for the year exceeded the minimum amount then there may be a tax. Form 1041 is used and the instructions will have the tax rates. If income of the trust is required to be distributed there may be a deduction for the gain. Again, get an accountant.

[Lazarus Bocanegra 306]

use bitcoin and declare nothing.  It will take them a little bit longer to send you to federal prison 

[TwiceHorn 31512]

On 3/3/2019 at 9:51 AM, 3adays said:

As an executor of an estate I had to sell a home last year. The proceeds were put into a trust for his daughter. Home went for about 150K. Any idea what the tax bill for the estates will be? 

About nothing.  Estate property receives a "stepped up" basis at death, meaning it is increased to the value of the property at death.  Now, conceivably, you could have put a value on it that differed from the sale amount and that would trigger some taxes, but the counterargument is that the sale value (unless rushed or "fire saled") pretty conclusively establishes the value of the property at death, so basis = sale price so no tax on Max.

[Horn_Spanker 524]

Read I could re-invest the proceeds into another property and avoid capital gains, is this true?

[TwiceHorn 31512]

Only if it is your principal residence. And only up to 500k if owned and reported jointly. https://www.irs.gov/businesses/small-businesses-self-employed/sale-of-residence-real-estate-tax-tips

 

And that doesn't have to be reinvested. Otherwise no. 

 

Well not true. There is a like kind exchange under 1031,but that is more complicated than reinvesting proceeds. 

Edited May 15, 2019 by TwiceHorn

[Gil Bang 25983]

If doing a 1031, it's required that the replacement property be identified in a timely manner.  

Get advice from people that do this a lot (an experienced and knowledgeable realtor is a good start, a lawyer/CPA too)

[luke duke 6413]

Wright?

Rong.

[TwiceHorn 31512]

I think you are overthinking this.  It's a fractional interest in a residential property.  Assuming you get long-term capital gains taxation, it will be a relatively small bite.  Plus, assuming it was inherited, the basis was stepped up to the value at death, further increasing your cost basis, so it's going to be a relatively small chunk on presumably a smaller portion of the money you actually receive.

[midtown 3346]

1 hour ago, TwiceHorn said:

I think you are overthinking this.  It's a fractional interest in a residential property. 

This.  People suggesting a 1031 for grandparents 2 bedroom shack worth $80k.  Now if you inherited it 20 years ago and its in a high growth area and there is $500 in gains that's a different story.  But still a 1031 with multiple parties attached sounds like a nightmare of epic proportions

Edited May 16, 2019 by midtown

[CO Horn 167]

You can also look at investing in an opportunity zone fund to defer paying the tax on the gain.

[Reagan1k 3024]

Whole lotta tail wagging the dog ideas here.

Twicehorn has it right.  You don't go broke taking gains and paying taxes.

Getting cute gets you broke.