Reducing capital gains - Posted by Brian

Posted by leslie on February 27, 2000 at 01:55:37:

Could this be a personal residence, and exempt from gain to the $250k limit?
Or could you lease and option until the tax situation improves, ie, 1031 or 1034 exchange is found.
If you just want cashflow a net lease might workout.

Reducing capital gains - Posted by Brian

Posted by Brian on February 25, 2000 at 13:11:09:

I’ve been talking with someone that may want to sell their 9 family building. It has 8-1bedroom units, and the 4bedroom unit they built on and live in. They bought the building in 1968 and now are looking at ranch houses to move into. The big concern for them is avoiding or reducing the about $100K in capital gains they would have if they sell outright.

I suggested a land contract to him, but I’m looking for any and all other ideas I can run by him.

Any and all help is appreciated.


Re: Reducing capital gains - Posted by Chris

Posted by Chris on February 25, 2000 at 14:04:49:

How about a 1031 tax deferred exchange for the investment property? You can find more info at-

Attorney Robert Bruss has a report on these exchanges for $4 available at

How Realty Investors Can Profit from Starker Delayed Tax-Deferred Exchanges (98289)

Someone who did a 1031 exchange recently recommended API to handle this.

For the residence that they live in see Bruss’s report($4) at the same order site as above to see if it qualifies for the $250,000/$500,000 Home Sale Tax Exemption:

1999 Realty Tax Tips: Eight Chapters of Tax-Saving Real Estate Ideas for Homeowners and Investors (99295)

-Good Luck,Chris

Re: Reducing capital gains - Posted by The Baze

Posted by The Baze on February 25, 2000 at 13:55:49:

First of all, a land contract is usually regarded as a sales transaction. Substance over form - what’s the purpose of the transaction? Who gets the rights and responsibilities of ownership? If the seller keeps paying the property taxes, and maintenance and such, then it could be treated as a rental transaction. That wouldn’t be bad, because, in all liklihood, the building is fully depreciated, so you wouldn’t be creating any more depreciation to “recapture”.

If, on the other hand, you, the buyer gets the rights and responsibilities of ownership, then the land contract is a sales transaction. There was an IRS private letter ruling in 1989 to that effect. He could probably take the section 121 exclusion for the portion of the building that has been his personal residence, after he recaptures the depreciation.

Also, new IRS regs say that on an installment sale, depreciation can be recaptured over the term of the sales agreement, as opposed to in the year of the sale, as had previously been the case. You might want to point that out to him. Hope this helps.

Tom Bazley

depreciation recature - Posted by Bud Branstetter

Posted by Bud Branstetter on February 27, 2000 at 11:19:19:

Do you have a reference for the IRS reg?