I have an investment property I own in Bucks County. There is no mortgage on the home. I was thinking of

Asked by Steve W, Philadelphia, PA Sun Nov 9, 2008

Selling it and buying 2 or 3 other rentals properties. Is there a way to do that that I won't be hurt too bad by the irs?

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12
Renee Porsia, Agent, Newtown, PA
Sun Nov 9, 2008
Hi Steve

I would have to agree with some of the other Realtors in that perhaps the 1031 exchange may be something to look into but also you probably won't settle this year on your new properties and would not impact your tax situation this year. Also, if you plan to do a lot of investments, I would advise you to seek out an accountant who you can depend on and who is up on all of the new tax laws.

I would love to help you with finding your new investments. I know of a few that may be worth consideration. Are you looking in Bucks County or Philadelphia? I would also love to offer you a free home value report for your current home. I would need to just take a look at the place. I could also give you advice on how to get the most for your home in today's market.

Let me know if I can help you in any way.

Renee Porsia
Associate Broker
RE/MAX ACTION REALTY
(215) 669-0589 Direct
(215) 358-1100 Office Ask for Renee
http://www.reneeporsia.com
2 votes
Chris & Step…, Agent, Philadelphia, PA
Sun Nov 9, 2008
Steve,

Sure. It happens every day. Just because you do not have a mortgage, it does not mean your cost basis is zero. So your cost basis is what you paid for it in addition to what you put into it. The profit for tax purposes would be the sales prices minus your closing costs minus your cost basis. Further, if you put your property on the market now, chances are it will not settle into 2009 (if you get a fast deal, postpone settlement till next year), then your tax consequence can be deferred until you do your taxes in 2010.

Buying other rental properties will not have any immediate tax impact with the IRS.

Your other option would be to do a 1031 exchange would which be a good option if you have a large gain on the subject propertty. You would then need to roll that up into another larger property.

I would sugest to consult your CPA or a real estate attorney as well for specifics and clarification, especially regarding the 1031 Exchange as that is more complex.

When you are ready to purchase other investment properties, check out a great investor site -

http://www.phillyinvestorhub.com .

Good luck !

Chris Somers
Web Reference:  http://www.thesomersteam.com
2 votes
Michael D De…, , 18969
Mon Nov 10, 2008
Steve,
is the property you own in Bucks County a rental typr property. Myabe you could keep it and rent it instead of sell it. Then you would be able to mortgage that property instead of selling it to buy your new investment properties. Leveraging and spreading out your assets may be more beneficial tax-wise. Check with your accountant to see if there are tax benefits.
Let me know if I am able to help in any way. The very best of luck to you!
Michael

Michael D Delp
Mortgage Pro
4802 Old Bethlehem Pike,
Telford Pa. 18969
Ph- 215-453-1025
Fax- 215-453-1012
Cell- 610-762-0318
michaelddelp@aol.com
michaelddelp@verizon.net http://www.mortgagepro.instantlender.com
1 vote
Edmund Choi, Agent, Paoli, PA
Sun Nov 9, 2008
Tax-deferred exchange. However, your replacement properties will need to be of greater or equal value. Please consult with your attorney and/or CPA.
1 vote
Keith Sorem, Agent, Glendale, CA
Sun Nov 9, 2008
Steve
The key to being able to minimize your tax liability is to work with professionals that can not only help you sell your current property and purchase the others, but can tell you what you tax liability will be when you sell THOSE properties.

Having gone through a similar experience I would be happy to put you in touch with some people that you can discuss your situation and develop some alternatives. Thorough planning now will help you save lots of pain, frustration, and money down the road.

Also, keep your eye on the new administration. Capital gains are going to be on their agenda, so I would move as quickly as possible on this. I would also suggest talking with an estate planner or financial planner regarding the final end game.
1 vote
J.D. "Dan" &…, Agent, Orange Park, FL
Sun Nov 9, 2008
Hi Steve,

Usually the best way to defer the taxes on the sale of investment real estate is use The IRS section 1031. This MUST be done with a 3rd party called an INTERMEDIARY. Your local real estate investment club, some banks, Titile Agencies, or real estate attorneys can assist you with locating an Intermediary. There are time lines that must be followed. If you have a real estate agent you normally work with bring that person up to speed with what you are attempting to do.

You CANNOT take advantage of the a 1031 deferred exchange without an intermediary. Do a google search on 1031 Deferred ExChange for more information

JD
Web Reference:  http://www.neflahomes.com
1 vote
Pat Zollo, , Horsham, PA
Sun Nov 9, 2008
Yes you can avoid paying tax by doing a 1031 Exchange. The proces has strict guidelines but is easilly accomplished. I have done a number of them for ivestor clients that I have. If yu wuld like more information, contact me. patzollo@verizon.net
Web Reference:  http://www.patzollo.com
1 vote
Gita Bantwal, Agent, Jamison, PA
Tue Feb 3, 2009
Hi Steve, I hope you have already talked to your accountant. If you have not yet listed orsigned with an agent I will be be glad to help you sell and buy replacement properties. I am experienced in 1031 exchange transactions.
Web Reference:  http://www.gitabantwal.com
0 votes
Frank Dolski, Agent, Lahaska, PA
Tue Jan 20, 2009
I agree with the other Realtors who stated that a 1031 exchange is the way to go. I have had numerous investors go this route. There are rules to the exchange but it does allow you to keep using the money to invest in other properties. Please feel free to contact me if you'd like more information on 1031 Exchange Companies.

Frank Dolski
Coldwell Banker Hearthside-Lahaska, PA
f.dolski@cbhearthside.com
http://www.FrankDolski.com
0 votes
Pat Zollo, , Horsham, PA
Fri Jan 16, 2009
Yes it's called a 1031 Exchange named for the section of the IRS code that allows it. Simply stated it allows you to sell the property and use the proceeds to purhase a diferent or more properties and pay no tax on the transaction, as long as you yse all the proceeds from the sale inthe purchase. I have done a number of these for my clients. If you would like more information, contact me.
Web Reference:  http://www.parzollo.com
0 votes
Vic Trub, , Philadelphia, PA
Fri Jan 16, 2009
Leveraging equity in your investment property to buy other investment property is a better and tax free solution. Get a credit line secured by your property and be ready to "pounce" as soon as a right "set of bricks" comes along. And it will! Because it's a buyers' market after all. Normally, I would not recommend "diluting" equity in your investment property to buy other properties, but now it makes a lot of sense.
I have over 10 years of real estate investment experience in Philadelphia area with over 650 income producing properties bought and sold for my clients.

Let me know if I can help.

Vic Trub, Licensed PA Real Estate Broker
Cloud9 Properties Ltd
Philadelphia PA 19149
215-962-2614
0 votes
William Leigh…, , New Jersey
Sun Nov 9, 2008
Steve: First, you need to talk to your tax accountant and if you don't have one, I'd suggest you get one. You're playing around with a reasonable amount of money, you know. Depending on your tax situation, the 1031 exchange is a way of trading like investments with no or little tax consequence. (If it is not exactly even, the overage can be taxed.) There are strict rules about how this is done and there is a third party required to clear the transaction and time limits on how long you have between the sale of a property and the definition of the replacement property. You have some time after that to actually complete the sale.

In that manner, you postpone the taxes on capital gains that you will have if you can sell for more than purchase price. (That will depend of how long you've had the property, and its present value in today's market.) That's why you should get a Realtor's price opinion and take it to a good tax guy to start.
0 votes
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