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Dan and Lucy Wilson Realty is a CERTIFIED EXCHANGE ADVISOR (CEA) which is the distinquished designation offered through the AMERICAN INSTITUTE OF REAL ESTATE EXCHANGORS and a member of R. J. GULLO & CO., INC., which is America's #1 Qualified Intermediary Network For Real Estate Exchanges.
Example of an exchange versus a typical sale:
Property Sale Property Exchange
|Basis at acquisition||100,000||100,000|
|add capital improvements|
|Subtract Cost Recovery (depreciation)||90,000|
|Equals your adjusted basis||10,000|
|Minus cost of sale (legal etc)|
|Minus adjusted basis||10,000||10,000|
|Equals your Gain (Profit)||115,000||115,000|
|Minus your depreciation recapture||90,000|
|X Tax rate (recapture rate 25% + 8%)||.33|
|Equals Tax Liability (what you owe)||29700 tax now due for recapture|
|- Suspended Losses|
|Equals CAPITAL GAIN||25,000 sell price - gain(profit)||25,000|
|X Tax rate (20% + 8%)||.28|
|= Tax Liability on gain||7,000 tax now due on gain|
|Total tax liability (you pay this!)||36,700 (29700+7000)||0.00|
|Less Mortgage bal (hypothetical)||50,000||50,000|
|= Gross Proceeds||75,000||75,000|
|Minus Total tax liability||36700||0|
|= Net Proceeds after taxes||38300||75000|
In this example you could walk away from the sale with an addition 36,700.00 to apply to your next purchase!! This is absolutely legal and recognized by the IRS. It is specifically addressed under Sec.1031 of the Internal Revenue Code. More information is available through IRS Publication 17.
Although it appears complicated, it really isn't. There is very little for the seller to do. Simply state that the sale is going to be an exchange and the Qualified Intermediary does the rest!
Call or E-mail for more information or visit Russell Gullo