All Forum Posts by: Bill Exeter

Hi @Rhonda Louis, 

Your cost basis is the original purchase price of the property plus any capital improvements made to/on the property less any depreciation taken.  This will compute your adjusted cost basis for tax purposes.  

Your taxable gain is the sale price, less certain closing costs less your adjusted cost basis.  

The taxable portion (if you do not 1031 Exchange) is first applied toward the depreciation recapture at 25% and then once you have recognized all of your depreciation recapture you would be taxed on the capital gain of 15% to 20%. 

You also need to look at the Medicare Surcharge (Obamacare Tax) to see if that would be triggered based on your adjusted gross income.  

Hi @Account Closed, 

I'm not sure what you mean by "FHA loan to 1031 exchange?" The property will qualify for 1031 Exchange treatment as long as it has been held for rental, investment or business use. It does not matter what kind of debt you have on the property.

Hi Will, 

@Brian Eastman is right on the money (as always).  Debt it debt, so it will trigger UDFI.  

Hi @Payman A., 

Selling a relinquished property to a related party is perfectly OK.  There is just a two (2) year holding period require if you sell to a related party.  However, buying from a related party is a completely different matter.  Buying from a related party generally will not work.  Your advisors can review Revenue Ruling 2002-83.  There are some exceptions that may work under certain circumstances, but in most cases they will not work. 

Hi @Payman A., 

Yes, purchasing a tenant-in-common (TIC) interest that you do not already own (and from a non-related party) absolutely qualifies for 1031 Exchange treatment. It is treated just like any other purchase of real estate.

Hi @Jordan Francis, 

I would chat with @Joel Owens on BP.  He can help you with net lease properties. 

Hi @Garrett Andersson, 

It sounds like both LLCs are owned by the same person and are likely both disregarded entities, so the taxpayer would be buying from himself.  It would not qualify for tax-deferred exchange treatment under Section 1031.  

Hi @Alex Gronbach, 

The most important thing to look for is a CPA with significant expertise and experience in real estate.  The cheaper CPAs often charge you to "learn" the subject matter while those who charge more already know the subject matter and can answer questions faster.  The answer depends on how knowledgeable and experienced the $1,800 per filing is.  We have over 10 entities in our family of companies and we pay anywhere from $850.00 to $2500 per filing (depends on the complexity of the entity).  I don't mind paying more if I get quick and accurate advice. 

Hi @Alexander Szikla, 

You are referring to buy a fee simple interest in real estate, and you are right, in many cases is makes more sense outside of the Self-Directed IRA because of other tax structures available. However, it can and does make sense in some cases especially if there is going to be a quick flip/sale that would be taxed at ordinary tax rates.

There are many other ways to use a Self-Directed IRA to invest in real estate such as deeds of trust, mortgages, tax lien certificates, etc. These produce ordinary income and make perfect sense inside of a Self-Directed IRA.

Hi @Megan Elliott, 

Yes, you are correct.  The new construction would have to be completed in time so that you can acquire and close on it no later than the 180th calendar day (exchange period).  The risk is that there can be unexpected delays and the new construction will not be completed in time. There is no ability to obtain an extension, so if you are not able to close within the 180 day exchange period it becomes a failed 1031 Exchange and taxable.  It is all about timing.