Rolling over profit from investment property - Posted by Chris

Real Estate Investing Real Estate Law
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Posted by dealmaker on March 21, 2007 at 15:57:44:

I think the reason for your confusion is a LOT of people still remember the old (I think it went away in '86!) rule on selling your residence. Back then, as long as you “rolled” the “profit” into your new residence there was no taxable gain. Today the rule is $250K (single filer) $500K (married filing jointly) of your gain is tax free on your RESIDENCE.

However, you’re talking about “investment” property. If the property was “held for investment” (I’m not sure if flips qualify-check with your CPA) then you can do a 1031 exchange. 1031 refers to the section of the Internal Revenue Code that covers these.

Best best is to read that section at irs.gov to get familiar. Or just google “1031” and read the FAQs in any of the 6 million “facilitators” who have links.

Congratulations on the substantial profit. And remember paying taxes is the sign of a successful investor. Just don’t pay too much.

dealmaker

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Rolling over profit from investment property - Posted by Chris

Posted by Chris on March 21, 2007 at 14:33:42:

I have heard conflicting stories on the ability to roll over the profit from an ivestment property to a new investment property in NJ. I am in the process of completing my first flip on a single family property in NJ. I will have a substantial profit and want to re-invest it. I was under the impression I could re-invest and not pay any capital gains. Can anyone enlightem me on the matter?

Thanks
Chris

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Re: Rolling over profit from investment property - Posted by Rich

Posted by Rich on April 06, 2007 at 01:02:05:

My understanding from my 1031 Exchange facilitator is that the property has to be held for “long term”, which means over 12 months.

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Re: Rolling over profit from investment property - Posted by Natalie-VA

Posted by Natalie-VA on March 25, 2007 at 14:15:52:

Quick flips don’t qualify for 1031 tax deferred exchanges. Ask your CPA.

–Natalie

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1031 Exchange - Posted by John Merchant

Posted by John Merchant on March 25, 2007 at 09:18:01:

Yes, a seller of investment RE can, by use of IRS 1031 procedure, defer his gain by moving it into another investment property.

Lots of info online, under 1031 exchange about this procedure and its rules.

Just remember your sales agreement MUST reference that you are doing a 1031 as you cannot touch the sales proceeds and later decide to do a 1031.

Seller’s 1031 “facilitator” agent takes the money and holds in in escrow for the subsequent RE purchase deal.