URGENT, URGENT...CAPITOL GAINS QUESTION - Posted by DaveH

Posted by David Krulac on February 22, 2002 at 08:46:10:

technically a 2 unit where the owner occupies one unit is 50% personal residence and 50% investment property and is treated as if it is two different properties.

Like kind can be any investment real estate including vacant land. Excluded would be personal residence or second vacation homes. But you can exchange an apartment for a store for vacant land and it will all be like kind.

David Krulac

URGENT, URGENT…CAPITOL GAINS QUESTION - Posted by DaveH

Posted by DaveH on February 20, 2002 at 22:50:47:

I HAVE A DEAL IN BROOKLYN NEW YORK WHERE THE OWNER OWNS A TWO FAMILY/WHICH IS HIS CURRENT RESIDENSE AND A THREE FAMILY THAT HE’S SELLING DUE TO PENDING FORECLOSURE… THE PURCHASE PRICE WAS $176k IN 1996. HE THEN MADE 50K IN REPAIRS. HE IS NOW SELLING IT FOR 380K. REPAIRS NEEDED 100k. NEW YORK LAW STATES THAT YOU WOULD HAVE TO PAY UP TO 33% IN CAPITOL GAINS TAX BECAUSE THE SECOND PROPERTY IS BEING VIEW AS AN INVESTMENT PROPERTT. HOW CAN I STRUCTURE THIS DEAL SO THAT THE SELLER WILL PAY THE LEASE IN CAPITIOL GAINS OR FOR THAT MATTER NON AT ALL. AND I WILL STILL BE ABLE TO PROFIT.
Perplexed Newbie
DaveH

Re: URGENT, URGENT…CAPITOL GAINS QUESTION - Posted by Andy M (SC)

Posted by Andy M (SC) on February 21, 2002 at 18:46:30:

I am not sure how this works, but can’t you gift it to a third party? Like an attorney and they gift it back to you when you go to buy another house? Like I said I am not sure how this works but I was told about this by another CRI and did not quit understand how it worked.

Re: - Posted by Ian(Honolulu)

Posted by Ian(Honolulu) on February 21, 2002 at 03:38:59:

Dave,
I’m a bit unclear as to whether or not your seller is also selling the 2 family. If he is, he could qualify for the capital gains exclusion (250k if he’s single and has lived there for 2 years or more). Maybe you could suggest to him he sell that rather than the three family if he isn’t selling it. If he is only selling the three family, he can still utilize a 1031 exchange. How much does he stand to gain? If it’s a poultry figure it may not be worth the hassle. However if it’s a sizeable figure, and he still wants to stay in real estate investment, perhaps a 1031 exchange into a larger property would suit him better. It all depends on his preferences.

-Ian

what about… - Posted by tang-0-rang

Posted by tang-0-rang on February 21, 2002 at 05:42:03:

Ian, lets say Dave’s seller wants to KEEP the two family and only wants to get rid of the three family… could he(dave) negotiate a sale on the two family, then do a 1031(with the seller) on the three family…thus giving back the two family, further negotiating for the balance of the exchange and everyone is happy?
would this work? would it be worth the hassle? is there a hassle? also would the fact that the three family is in foreclosure cause some problem?
thanks for your time
Todd Williamson (CO)

Re: what about… - Posted by Ian(Honolulu)

Posted by Ian(Honolulu) on February 21, 2002 at 17:06:06:

Keep in mind I have no legal expertise… only some knowledge from practice. Before making any major decisions consult a legal professional. That being said, I don’t believe your suggestion would work. 1031 exchanges must be done with “like” properties, meaning the same kind of classification. In this case, the 2 family seems to be his personal residence (correct me if I’m wrong.) The 3 family is being used as a rental, therefore classifying as an investment. The two can’t be exchanged because they’re not in the same category. Plus, even if it were possible, the whole foreclosure deal makes it a sticky situation. Add on top of that closing costs for 2 deals, which could quickly cut into if not diminish any potential tax savings. Just my thoughts…

-Ian