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Old 03-25-2016, 11:18 AM
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Capital gains tax

I have a piece of land that I purchased about 10 years ago. I entered an agreement with a real estate developer in 2014 for construction of apartments. The agreement was to give me 3 apartments in lieu of the land and keep the remaining 7 for him. The apartments will be handed over to me soon. When will the tax liability arise for payment of capital gains tax? Would it be when I get the apartments or when I sell them?

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Old 03-25-2016, 08:37 PM
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I have a piece of land that I purchased about 10 years ago. I entered an agreement with a real estate developer in 2014 for construction of apartments. The agreement was to give me 3 apartments in lieu of the land and keep the remaining 7 for him. The apartments will be handed over to me soon. When will the tax liability arise for payment of capital gains tax? ====> I guess it depends; no gain / loss shall be recognized on the exchange of propertythat you held for
productive use in a trade / business or for investment if such property is
exchanged solely for property of like-kind which is to be held either for productive
use in a trade or business or for investment.so you need to check if you qualify for 1031 likekind exchange


Would it be when I get the apartments or when I sell them? =>Aslongas you qualify for aka 1031 exchange then, Recognition of the gain is deferred until the apartments
acquired in the exchange are disposed of in a subsequent taxable transaction, or until
another triggering event occurs. Thus, the gain is merely deferred, not tax-free.on disposition of the apts, you must also recapture sec 1250 deprecaiiton taken in previous years UNLESS you take losses on the sale of the properties.



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Old 03-26-2016, 10:41 AM
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Capital gains tax

Thank you Wnhough.

It looks like there is a 180 day period for completing the transaction to be eligible for like kind exchange. While I entered into an agreement in 2014, I am getting the apartments in 2016 after about 2 years. Would I still be eligible for the exchange?

Assuming I am eligible for the exchange and if I sell the apartments, what would be the cost basis? Is is cost of the land when I purchased it or FMV of the apartments on the date when I get them? I will work with a CPA but just wanted to understand a little bit on like kind exchange. Thanks,



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Old 03-26-2016, 06:56 PM
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Quote:
Originally Posted by mheights View Post
Thank you Wnhough.

It looks like there is a 180 day period for completing the transaction to be eligible for like kind exchange. While I entered into an agreement in 2014, I am getting the apartments in 2016 after about 2 years. Would I still be eligible for the exchange?

Assuming I am eligible for the exchange and if I sell the apartments, what would be the cost basis? Is is cost of the land when I purchased it or FMV of the apartments on the date when I get them? I will work with a CPA but just wanted to understand a little bit on like kind exchange. Thanks,
It looks like there is a 180 day period for completing the transaction to be eligible for like kind exchange. While I entered into an agreement in 2014, I am getting the apartments in 2016 after about 2 years. Would I still be eligible for the exchange?==>> I think so;the 45-Day Identification Period begins with the closing of the relinquished property and requires the identification of like-kind replacement property. The 180-Day Exchange Period runs concurrently with the 45-Day Identification Period and requires the acquisition of all desired identified replacement properties. Signing an Agreement of Sale is not sufficient. youmust actually take legal and equitable ownership of the replacement property on or before the 180th day, but you di d notyet take take legal and equitable ownership of the replacement property

Assuming I am eligible for the exchange and if I sell the apartments, what would be the cost basis? Is is cost of the land when I purchased it or FMV of the apartments on the date when I get them? =====>>NEEDLESS TO SAY,
to decide if you want to do a like-kind exchange of your land, you should determine how much capital gain you will have to pay tax on if you sell the property and do not do an exchange. To determine it, you need to know your current adjusted tax basis in the pty., i mean your orginal purchase price plus other costs that you spent after the purchase of the piece of land
The first step is to go back and establish the starting basis when you acquired the property.
In a simple purchase the starting basis is what you paid for thepiece of land property plus the costs necessary to acquire the property. Unfortunately, costs to obtain financing (like points) or prepayments for insurance, interest, or taxes are not included

I will work with a CPA but just wanted to understand a little bit on like kind exchange.=>.agreed you also need to provide your cpa with accurate info for accurate return.



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