Investment Real Estate 

1031 Exchange into another property 

In a 1031 exchange, an investor sells a property and must purchase a “like-kind” investment property 

-replacement property must be of equal or greater value 

-must invest all the proceeds 

-must be the same title holder and taxpayer 

-must identify the property within 45 days 

-must purchase the new property within 180 days 

-must use a qualified intermediary 

Do not sell 

You must ask, why am I selling?  If it is to get quick cash or to absolve oneself from the management headache there are other options. 

-refinance to pull out cash 

Refinancing allows for quick access to cash and keeps the investment working for you.  With low-interest rates refinancing is an excellent option. 

-hire a property manager to offload the work 

Hiring a professional property management company removes the heads of management and keeps the investment working for you. 

Sell and pay the taxes 

Occasionally it makes the most sense to just sell and pay the taxes.  Most sellers will pay 15% on net long-term capital gains 

Installment Sale 

In an installment sale the seller is allowed to realize the capital gain on the sale over several years instead of incurring the tax all in year one. This allows the seller to spread out the tax burden over many years. With an installment sale the seller receives regular principal installments and interest income. The interest income earned would be more than is earned by putting the money in the bank. 

Long-term vs. Short-term 

Long-term capital gains are triggered on assets sold that are held for less than one year. Short-term capital gains are treated like ordinary income.   

Short-term capital gains – depending on your tax bracket ordinary taxes could be as high as 37%. 

Long-term capital gains – If your tax bracket is: 

– 0%, 15%, or 20% depending on your income and filing status. 

Personal residence 

You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly. To qualify you must have used the property as your primary residence for two of the last five years. 

Basis 

In community property states, like California, surviving spouses get a stepped-up basis on transferred assets including real estate. 

Call me and we can discuss your specific circumstance, 

Harold Bond, Realtor, DRE# 01114527 
818 653-2481 cell 

Harold@BondRealty.com