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Ask Irwin Law Your Own Question
Irwin Law
Irwin Law, Attorney
Category: Legal
Satisfied Customers: 7276
Experience:  Lawyer & Real Estate Broker, 30+ years, foreclosure, land contracts, inheritance, probate.
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There is commercial property that is owned and paid for if

Customer Question

there is commercial property that is owned and paid for if sold in.... Montgomery county tx in city of Conroe...if sold will the cash proceeds be taxed as regular income or special tax; however, if proceeds will be put into another commercial property will tax be lower or none at all? does it have to be 100% of the proceeds or can it be less that go back into commercial property or can some be kept in cash or used to pay bills on other commercial property/ personal property?
JA: Has anything been filed or reported?
Customer: no not done yet
JA: Anything else you want the lawyer to know before I connect you?
Customer: no
Submitted: 8 months ago.
Category: Legal
Expert:  Irwin Law replied 8 months ago.

Good afternoon and thanks for using JUST ANSWER. If you are selling a commercial property that was held for investment for longer than one year, the cash proceeds will be taxed as capital gains tax, rather than ordinary income. Under IRS code section 1031, if the proceeds are reinvested in another property, and the code regulations for that type of transaction are strictly followed, then the capital gains tax is postponed, rather than eliminated. The capital gains tax is transferred to the sale of the replacement property. That property to can be sold under a 1031 exchange to third property. You can keep some of the proceeds from the first sale, and pay capital gains tax on that portion of the money received in the year of the sale.

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Customer: replied 8 months ago.
can part of proceeeds be paid on a debt of other currently owned commercial prop and avoid cap gains tax?
Expert:  Irwin Law replied 8 months ago.

Any part of the sale proceeds that is used for purposes other than the purchase of the replacement property becomes taxable. Thus if you received $100k from the sale, and purchased a like kind property for $75,000 and keep $25k for other purposes, you would be taxed on the $25,000 in the year of the sale.