Posted by David Krulac on May 16, 2000 at 20:48:04:
Dealers may NOT…
- use tax free sec 1031 exchange
- take lower capital gains treatment, usually 20%, and must use federal rate of their ordinary income up to 39.6%
- use installment sales to defer tax
if you are a flipper but NOT a dealer, which is hard to define and may be less than 5 or 6 sales per year, and may be you have another full time job, or maybe you have another major source of income like rentals such that your buying and selling is not your major business and you keep property for more than 12 months, then you just might be a …
a non-dealer.
Capitol gains Tax - Posted by Mordy
Posted by Mordy on May 16, 2000 at 09:27:21:
If anyone could tell me if there is a way to avoid C.G. tax on a property which I just purchased and want to flip quickly I would greatly appreciate it.Thanx
Capital Gains Tax - Posted by Dave T
Posted by Dave T on May 16, 2000 at 17:28:33:
When you purchase real estate with the intent of reselling at a profit (such as via a flip), your real estate is considered business inventory. Business inventory is not eligible for IRC 1031 tax treatment, and at the moment, all your profit is taxed in the year of sale. There is no capital gains tax treatment for your flip transaction, regardless of your holding period. All your profit is ordinary income and taxed at your marginal tax rate. So, to keep avoiding capital gains taxes, keep flipping properties.
I suspect that your real question is how to avoid/defer taxes on the profits from your “flip”. The only way of which I am aware is to do your flips in your Roth IRA. As I understand it, as long as your profits stay in your IRA, there is no income tax due.
If you want to take cash away from the deal and put it in your pocket, then you should look at techniques for minimizing your tax bite. If you are in the 28%+ tax bracket, then doing your flips inside a C-Corporation will at least lower your tax rate to 15% on the first $50K of taxable corporate income.
Whenever you get to the point where you are ready to acquire investment real estate, then a wide array of tax avoidance/deferral strategies are available to shelter your sale profits.
Re: Capitol gains Tax - Posted by scott
Posted by scott on May 16, 2000 at 16:49:43:
what about a 1031 tax defer