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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12548
Experience:  Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
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hi...i own a small lot of land, big enough for one small building

Resolved Question:

hi...i own a small lot of land, big enough for one small building to go up with 3 units...i would like to sell it/do an even exchange with a developer--the land for one of the condo units...but would like to know how this affects me tax wise...is it better to have no money change hands, a barter exchange--or is it better for me to take cash for the land and then buy the unit from the developer?...this would be my 1st time purchase of a condo or home...thank you....
Submitted: 11 months ago.
Category: Tax
Expert:  Megan C replied 11 months ago.

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

When you are exchanging land for a condo, is the condo going to be an investment or personal use?

MyVirtualCPA :

If it is an investment, then you are better off doing a like-kind exchange where you swap the land for the condo. You cannot do this, however, if you are using the condo for personal purposes.

Customer:

i was thinking for personal use at some point but am not 100% decided...if i swap for an investment and only rent it about a year and then decide to move in...does it being an investment still hold?

MyVirtualCPA :

Yes, because it was an investment property at the time of the sale.

MyVirtualCPA :

It's called a 1031 exchange, and it would need to be set up through a qualified intermediary

Customer:

thank you....what would the taxes be on such a 1031 exchange as no money changed hands...would there be any tax as income at end of year?

MyVirtualCPA :

The income tax would hit when you sold the condo later on down the road

MyVirtualCPA :

You are deferring the gain on the sale of the land, but will claim it once you sell the condo

Customer:

i see...if the developer and i did the 1031 exchange and he paid a little bit as cash for lot, would the cash and cash only be taxed as vast majority would be an exchange...and if so as ordinary income or something else?

MyVirtualCPA :

You are correct. The cash is called "boot" and if you receive boot the transaction is not fully tax-free

Customer:

it would be as ordinary income then?....and if the condo is sold by me in a few years, would it be considered a short or long term asset? or does that matter?

Customer:

or would any boot be considered capital gains and taxed less?

MyVirtualCPA :

It would be taxed as capital gains. If you have it longer than one year then it would be a long term capital gain

Customer:

if less than a year it would be short term?...tax wise, do you pay less for a long term capital gain?

MyVirtualCPA :

Yes, you pay less for a long term gain

Customer:

is there a set % for short vs. long? do you know what it is?

MyVirtualCPA :

Short term capital gains is taxed at your ordinary rate.

MyVirtualCPA :

Long term capital gains are taxed typically at 15% but at 20% if you make more than $400,000 a year, and 0% if you are in the 10-15% tax bracket

Customer:

ok, would the same apply to sale of condo? if i have it for over a year, it would be long term capital gains taxed at?

MyVirtualCPA :

Yes, if you had it over one year it would be taxed as a long term capital gain

Customer:

ok, if i have any more questions i will let you know....thank you...

MyVirtualCPA :

you're welcome

MyVirtualCPA :

If you would, please rate my answer as "excellent" so that I may receive credit for assisting you today

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12548
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and 4 other Tax Specialists are ready to help you
Expert:  Megan C replied 11 months ago.
Thank you for your positive rating. Please come back and see MyVirtualCPA any time you need a tax, finance, or social security question answered. It was a pleasure working with you.
Customer: replied 11 months ago.

hi...what is the 10-15% tax bracket mentioned? thank you....

Expert:  Megan C replied 11 months ago.
If your ordinary income tax bracket is 10% or 15% then your capital gains tax rate is 0%.

Please let me know if you have further questions. If not, please rate this response so that I may receive further credit for assisting you today. Thanks
Customer: replied 11 months ago.

hi...i have low income...what are the cut offs that qualify one for the 10 to 15% and what if you are at say 0 to 5 to 9%?

Expert:  Megan C replied 11 months ago.
There is no 0, 5, or 9% tax bracket. You can see the tax brackets, HERE. It depends on your filing status where the cutoffs lie.

Thanks again for using JustAnswer.com, and please rate my follow up responses so that I may receive further credit for assisting you today.
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12548
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and 4 other Tax Specialists are ready to help you
Customer: replied 11 months ago.

hi...on the tax brackets, is the capital gain tax on the amount only that is over, or is the whole amount then taxed? thank you....

Expert:  Megan C replied 11 months ago.
No, if you are in the 25% tax bracket or higher you pay 15% capital gains tax on 100% of the gain. There is no partial capital gains tax - it's all or nothing.

Thanks, XXXXX XXXXX take a moment to rate my response as "excellent" so that I may receive credit for assisting you today. Thanks again.
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12548
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and 4 other Tax Specialists are ready to help you

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