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    1031 Exchange Company
     

    Capital Square are a tax advanced real estate investment company offering individuals the option of investing in commercial properties for future benefit.

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  • Real Estate Loophole Or Lifting Cap - What Should I Do?

    The Tax Reform Bill passed by the U.S. Congress this week (Part of a larger "Tax Relief for the American People" Bill) will impact everyone. The bill does include a "temporary" tax break for real estate investing, which has been debated in the press. The debate is mostly over whether or not this is a real estate loophole or whether it benefits everyone.

     

    Let's look at the 1031 Exchange Tax Relief Bill. This Act helps encourage people to stay in the real estate business by lowering the long-term capital gains tax on the gains from selling a real estate investment.

     

    This Act is really a marketing ploy. The act makes it possible for people who have self-funded their real estate business to claim the tax exemption by selling the building to the buyer. It helps the buyer but the investor must repay the IRS the tax relief.

     

    You may be asking "is this a real estate loophole? How can I take advantage of the tax relief when selling my home?" The answer is: you can take advantage of the tax relief and you may qualify for the exemption on selling your home but you do not qualify to take the tax deduction.

     

    This act "gives" people the opportunity to sell their real estate to another taxpayer who would not have a real estate income tax liability. That is the easy part. The IRS imposes a 30% tax on the taxable gain in the case of a "transactional" sale.

     

    After determining the contract value and the value of the real estate investment, the IRS deducts the transaction amount from the "transaction price" on your return. The IRS will most likely tax you in the normal way on the net income from the real estate investment, even though you don't receive the exemption. The program is a boon to many real estate investors who work hard and make wise investments. The IRS makes the offer to tax shelter or get rid of your tax liability by giving you the opportunity to take advantage of the tax exemption.

     

    But, this isn't a real estate loophole. You must sell your home to the actual buyer. The real estate investors are the real estate sellers.

     

    The only real advantage to this program is that the IRS will make it easy for people to sell their real estate. You will not have to go through the lengthy process of going through the IRS. There is no need to produce records of the purchase price, the value of the real estate investment, the contracts.

     

    The only thing that you need to do is sign the information, accept the tax break and the IRS will process the real estate investment tax relief for you. This process will take longer than you think and you may not be eligible for the exemption.

     

    If you want to take advantage of the tax relief from selling your real estate, you need to look at the complete circumstances. There are ways to minimize your tax liability by using a cash basis real estate investment. You must weigh your costs against your benefits to get the best return.