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I have a looming $3000 in s/t cap gain & 34,000 in l/t cap

I have a looming $3000...
I have a looming $3000 in s/t cap gain & 34,000 in l/t cap gains & $100k in cash from stock sales.Best way to reduce the tax. Can't I take l/t gains over time. My income this year's was about 35K. I am looking to put as much into a Roth & regular IRA..what are the limits for 17? The remainder is going to purchase income property. Any good ideas please
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Customer reply replied 28 days ago
Are you a tax accountant or a Certified Financial Planner?
Answered in 2 minutes by:
11/18/2017
Chad CFP ®
Chad CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Finance
Satisfied Customers: 917
Experience: Managing Director
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Hello, My name is ***** ***** I will be able to assist you today.

I'm a Certified Financial Planner and IRS Enrolled Agent

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To know if you are able to contribute to a Roth or an IRA I would need to know your approximate earned income, filing status and whether or not you or your spouse has access to an employer sponsored retirement plan.

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I see you stated your income was $35,000

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Tax payers who are in the 15% tax bracket would pay 0% Long Term capital gains.

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Customer reply replied 28 days ago
Unmarried single filer. ~$35k in w-2 income. Age 60. Own my home in full.

To be in the 15% tax bracket as a single tax filer your income would need to be below $37,950

___

If your income is below $37,950 your long term capital gains tax rate would be 0%

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Therefore you wouldn't owe any capital gains tax due to your income of $35,000 T

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Customer reply replied 28 days ago
My income without deductions will be between 75-90$k.
No employee plan

Income of between $75K and 90K would place you in the 25% ordinary income tax bracket and therefore your long term capital gains tax would be a rate of 15%

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You are eligible to contribute $6,500 to an IRA and deduct the contributions.

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If you are looking to purchase investment property then you would be able to deduct the associated cost with acquiring that property. Generally in the year you incur the expense although certain items do have to be capitalized and depreciated over time.

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Customer reply replied 28 days ago
These gains came from an inheritance which was taxed when I recs it. I had to liquidate. How can I reinvest & pay the l/t over time? Also re the Roth Ira-contribution max?

To summarize, you can contribute $6,500 to a tax deductible IRA.

Your long term capital gains would be taxed at 15% if your income is between $75K and $90K.

If you purchase investment property then you would be able to deduct certain expenses.

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Generally, inheritances receive a step up in basis and wouldn't be taxable to you if you sold the property shorty after inheriting the property.

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Customer reply replied 28 days ago
Have you any creative ideas to pay the l/t over years. Any ideas besides rolling it into an investment property?

The Roth contribution is also $6,500

You have to pay capital gains in the year you receive them. You can't pay the tax over time unless you establish an installment payment with the IRS

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If you inherited the property, you generally won't have capital gains tax to pay.

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Customer reply replied 28 days ago
The sale of securities occurred inadvertently. It was taxed when I recs the inheritance. Then invested. Isn't this double taxation?

Long term capital gains are taxed a more favorable rate then almost every other tax rate

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From what you have shared, I don't believe you would owe any long term capital gains tax

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How did you inherit the property/stocks ?

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Customer reply replied 28 days ago
Let me clarify. I inherited $ from an insurance payout on my father's debt. I paid taxes on it & my family invested the remainder in stocks& bonds.
Customer reply replied 28 days ago
I meant my father's death. Sorry to be so confused��

Insurance proceeds pass tax free

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With few exceptions

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In my opinion, from what you are telling me that you are in good shape.

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Customer reply replied 28 days ago
It was part of a very large family trust. I paid nearly 35% taxes on it. Since then I've had a hip & 2 shoulder replacements & hav e had to draw down on the capital yearly. I don't comprehend why I need to pay tax on deductions again
Customer reply replied 28 days ago
I understand the cap gains are appreciation of the original investment.
How can I rollover the cap gains so I pay only a portion of the l/t annually. In the past I paid only to the extent of losses & carried the remainder forward.

Your tax advisor should be able to explain exactly why you would need to pay tax.

Generally the trust will pass along income to the beneficiaries of the trust and then the beneficiaries pay taxes on the income generated from the trust.

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Losses you can carry forward until you are able to use all the losses against income.

Gains, you would need to pay in the year you receive the gains.

You can fund an IRA for a deduction.

Other then that you are generally limited to deductions associated with business expenses

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You can't roll capital gains.

You can defer capital gains with investment properties

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Customer reply replied 28 days ago
My present strategy is to rollover the remaining cash into an investment income property. Are there any other options that could reduce my liability tax wise. I don't need to pay on the $100k that is sitting in a money market account at this time. Do I need to invest it into the property this year..or shall I have to pay taxes on all of it..not just the cap gains. Sorry to be so confusing

Deductions from income are for business expenses such as buying an income producing property or owing a business.

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In my opinion, I would wait to find the right property and if you owe any long term capital gains tax, I would pay the tax because the rate you would pay is low compared to other rates of taxation.

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Customer reply replied 28 days ago
I'm attempting to defer by purchasing an income property. Will I need to create an actual company for that investment income. I also have a Sch C self owned small business. Ant further suggestions m

The IRA would decrease your income by $6,500

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You don't need to create a company.

It is preferred to create an Limited Liability Company to limit your personal liability.

You can form an LLC relatively easy. The requirements are different state to state

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Customer reply replied 28 days ago
The Roth isn't deductible correct?

If you have a small business then investing in the small business will reduce your taxable income

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The ROTH is for after tax money and the contribution is not deductible. Only the traditional IRA may be deductible.

Chad CFP ®
Chad CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Finance
Satisfied Customers: 917
Experience: Managing Director
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Customer reply replied 28 days ago
I found the property & am rushing to purchase before year end. I am leveraging & getting a loan for the remainder needed. My house I may sell next year. I can open an old easily. If I get a residential loan for the income property..will that work w/ an LLC?
Customer reply replied 28 days ago
Would you recommend putting it all in a CRUT? I have no heirs & would like to help people with the funds???
Customer reply replied 28 days ago
I think the IRA contribution would cancel out most of the cap gains. What's the deadline for the 6500 contribution to the IRA? please. I regret this is so dambably confusing!
Customer reply replied 28 days ago
Hello?
Customer reply replied 28 days ago
Chad are you still there?

I was communicating with another client. Give me one minute to review your questions

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The residential loan would work for the LLC. When you are requesting the loan you will want to ask the loan officer that you want to put the title of the home in the name of the LLC and ask what paperwork they require to put the home in the name of the LLC.

You don't have to take this step, but your overall liability will be separate. Additionally, if you properly insure your home then most liability issues are covered by the insurance policy.

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At this point, I wouldn't recommend a Crut due to the additional requirements of CRUT. You can always make that decision down the road after you complete the purchase.

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The deadline to make an IRA contribution is April 15 2018. Therefore, you can review your taxes and make a decision to contribute to an IRA and how much to contribute using final numbers from your distribution.

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Customer reply replied 28 days ago
Thank you. I don't suppose you have a better idea than llc/income property.
Customer reply replied 28 days ago
Oh yes. I've had a family member living with m e for about 7 months by year end. He is destitute & I provide necessities etc. Can I deduct as a dependant altho he's a distant relative?

A better idea to defer taxes.... The IRS is real good at ensuring taxpayers pay taxes on profits or earned income.

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If you provide more than 50% of the support for the family member and they have very little earned income then you may be able to claim the family member as a dependent.

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Customer reply replied 28 days ago
Please clarify the deferred tax answer. I think the IRA will cover tbmhe cap gain tax. You have no other creative legal ideas besides rolling it into the income property?

IRA grow tax deferred, but you eventually have to pay tax when the funds are distributed

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Customer reply replied 28 days ago
I am aware of that. Can I continue to contribute after age 62.5?

Yes, as long as you have earned income

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Customer reply replied 28 days ago
The income property would be considered passive vs earned..is that correct? I plan retire at 65.

Generally passive income unless you are a real estate professional

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Customer reply replied 28 days ago
Are there any restrictions on deductions of passive income at this time & i know none of us can see the new tax reform but what would happen to the deductions/losses from the 1st couple of years on the income prooerty?

Currenlty you are allowed a maximum of $25,000 in passive real estate losses. In the event you have more than $25,000 in losses, you may carry forward the losses for as long as you needed

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Customer reply replied 28 days ago
Part of the property is rental the rest is 80 acres of timber etc..undeveloped. so there will be a great deal to do to fully realize max. Income. I've calculated possibly 3 years due to labor shortages - im in the Ca fire area.

I would think that capital loss carry forward would remain the same and I haven't heard any different thus far.

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Wow, you have some work in front of you

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Was the property in the fire?

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Customer reply replied 28 days ago
What forms will need to be filed for the income prop? Do I need it's approval for it?

Schedule E will need to be completed. You don't need any special approval. Just keep good records and don't co mingle your funds if possible.

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Customer reply replied 28 days ago
No it was not. That's why I'm buying it. It's very close to major cities has housing units on it already. Housing is very scarce here. I have enough funds to develop the rest over time.
Customer reply replied 28 days ago
I anticipated those things. I'll let you go now. Thank you for your help! Have a great day✌��

Thank you.

Have a great day

Good luck!

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Chad CFP ®
Chad CFP ®
Chad CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Finance
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