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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Capital Gains and Losses
Satisfied Customers: 263
Experience:  Over 20 Years experience in resolving tough tax cases
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I recently sold my farm that ive owned since 1981, my tax

Customer Question

i recently sold my farm that ive owned since 1981 , my tax pro said the capital gain tax would be 125000. is there any thing i can do to lower or elimate this tax
JA: I love the idea of making big money with investments, but there are so many things that could go wrong. The Accountant will be able to help you. Please tell me more, so we can help you best.
Customer: i bought the property for 200,000 in 1981 and sold in august for 1,500000.i took 440000 down and financed the rest,the down just paid off mortage so i dont have any cash . i kept a life estate but basicly sold my home.
JA: Is there anything else important you think the Accountant should know?
Customer: im not sure where to get the taw money since the bank got all the money
Submitted: 1 month ago.
Category: Capital Gains and Losses
Expert:  emc011075 replied 1 month ago.

Hi. My name is ***** ***** I will be happy to help you.

The capital gains calculation is pretty straightforward: sale proceeds - purchase price - capital improvements + depreciation taken over the years. The financing (downpayment, mortgage payments) is ignored.

The only way to postpone capital gains is to take the entire proceeds (1.5M) and purchase a replacement property. The process is called 1031 exchange. However you only have limited time to identity/locate and purchase the replacement property and the proceeds must be deposited with a third party (bank or trust) for the transaction to be treated as 1031 exchange.

If you cannot pay the balance you can apply for an installment agreement. These would be your only two options.

Expert:  emc011075 replied 1 month ago.

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?