1031 exchange

[TrustUser]

ouch - california gets me for all ordinary income !!

i need to ask my investment partner if he is an intermediary - he is a broker.

and someone i would trust to hold my funds.

can you give me a quick ballpark ?

in terms of actual dollars, will the dollars taxed by the state be more or less than the dollars taxed by the feds ?

 

[tranquility]

ouch - california gets me for all ordinary income !!

i need to ask my investment partner if he is an intermediary - he is a broker.

and someone i would trust to hold my funds.

can you give me a quick ballpark ?

in terms of actual dollars, will the dollars taxed by the state be more or less than the dollars taxed by the feds ?

If, when you wrote:

i make a decent amount of money each year, but nothing out of the ordinary. the profit i would make from the sale of the land might quadruple what my normal taxable income for the year is.

if i were to make 200,000 in profit,

Means (X + 200000) = 4X [math] therefore you will make about $66,666 in salary and $200K in capital gains. Assuming standard deduction and you are married, I'd guestimate (with no withholding on salary) about:
Federal income tax: $22,780
Obamacare: $633
California: $18,986

 

[TrustUser]

okay, thanks

the state will be somewhat similar to the feds

 

[tranquility]

okay, thanks

the state will be somewhat similar to the feds

We have vastly different theories of what "similar" is in regards to taxes. But, I accept your point.

 

[TrustUser]

LOL - normally the feds are 5-10 times more tax than the state !!

but capital gains with one and normal income on the other are evening the scale out.

i havent yet given up on the idea.

i have done some more research. i guess the first step is that the contract with the buyer of my land is supposed to have language in it that notifies the buyer of my desire to do a 1031 exchange.

and it looks like i end up filing an 8824 with the irs, once everything is complete. not sure about california, but they do have 1031 capabilities, so i can defer the state tax, as well.

i assume many of your clients do exchanges ? what do you think about them ?

i can defer my tax. but then i am forced to purchase a property at the same time, which is not necessarily the best time to make a purchase.

plus i take some risk by having my funds deposited with the intermediary ?

 

[tranquility]

LOL - normally the feds are 5-10 times more tax than the state !!

but capital gains with one and normal income on the other are evening the scale out.

i havent yet given up on the idea.

i have done some more research. i guess the first step is that the contract with the buyer of my land is supposed to have language in it that notifies the buyer of my desire to do a 1031 exchange.

and it looks like i end up filing an 8824 with the irs, once everything is complete. not sure about california, but they do have 1031 capabilities, so i can defer the state tax, as well.

i assume many of your clients do exchanges ? what do you think about them ?

i can defer my tax. but then i am forced to purchase a property at the same time, which is not necessarily the best time to make a purchase.

plus i take some risk by having my funds deposited with the intermediary ?

People hate paying taxes. The general theory is to push taxes as far out as possible. The only difference was a few years ago when it became clear the Democrats were dying for more spending and taxes it was certain taxes were going to rise markedly and some took profits before the jump. While the desire for more taxes and spending are still there, the political landscape is different and it is unlikely large raises are coming and the general feeling is to delay taxes once again. 1031 exchanges are used by most of all of our serious clients. Sure, when the property is eventually sold it can hurt. But the advantage of leveraging unpaid taxes into the property far outweighs the eventual hurt. Besides, maybe you'll die and your heirs get a step-up!

The whole purpose of the law is to keep money invested. If you don't have a business plan on how to reinvest the money into like-kind property, it is probably better to sell, pay the taxes and buy hookers and beer. (Or, whatever you want to do with the money.)

 

[TrustUser]

LOL - i will be re-investing in something.

of course i dont know yet if they are gonna buy.

this all started just a few days ago.