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Marvin,EA, Enrolled Agent
Category: Tax
Satisfied Customers: 1672
Experience:  Enrolled to Represent Taxpayers Before The IRS
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selling property and income taxes

Resolved Question:

If you buy a property for $40,000 and sell it for $70,000 and reinvest the money in other property immediately - do you still owe taxes on the $30,000 profit? If someone sells a property that has been completely depreciated, for $80,000 gets $30,000 down payment and finances the rest, does that person owe income taxes on the $30,000?
Submitted: 8 years ago.
Category: Tax
Expert:  Marvin,EA replied 8 years ago.
Thank you for using Just Answer. Since the tranaction was not a Like-Kind Exchange the $30,000 you received, if the property was held for more than one year, is taxable at capital gains rates. If you sell property that have be completely depreciated, you have no basis and the total amount you received is taxable as ordiary income ($80,000).
Customer: replied 8 years ago.
Reply to Marvin,EA's Post: what is Like-Kind exchange and how would that have altered the answer if it were like-kind?
Expert:  Marvin,EA replied 8 years ago.

Like-Kind Exchanges means property of the same nature or character. Both the property traded and the property received must be held by the taxpayer for business or investment purposes. The property to be received in an exchange must be identified in a written agreement within 45 days after the transferred property is surrendered.

If the transaction was a like-kind exchanges, one property would have be exchange for another property and if no cash was exchanges there will be no realized gain.

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