I’m trying to calculate capital gains on a potential sale of property.
In general, is the 15% tax on the NET profit, meaning:
Sales price minus RE commission minus purchase price
OR is it BEFORE commission to broker is paid?
Thank you! :wink:

the broker’s commission is a expense related to the sale; you do not pay tax on those dollars (your broker does ;D)

Thank you, that’s what I thought! 8)
Also, I just learned that 1031 exchange only works when you keep the new property 5 yrs or more, right?

The IRS doesn’t set a specific timeline…at least 1 year of ownership is the most often discussed…


Hi … a 1031 does defer your taxes. And, you can 1031 indefinitely from one property to another (this is my understanding, and I have done several - just must fit in the like property for like property) – you can still get caught with taxes depending on property basis, etc. Your CPA should be knowledgeable with 1031 exchanges, and be able to answer all of your questions. If he can’t - you have the WRONG CPA. You can also refi a property which allows you to take money out without taxation too. But, again, talk with your CPA because it may affect your future exchange up because of the loan amount. There are specific rules on exercising a 1031 exchange - so don’t do it blindly. Hope this helps you. Linda

important note: if you want to do a 1031 exchange, you must set that up PRIOR to closing the sale of the property you currently own.

the basics of a 1031 are fairly straight-forward and there are many good resources, books, etc out there and with 30-60 mins of reading you can understand the basics. The devil is in the details and the what-if circumstances and this where a good exchange accommodator is very important; by the time your CPA sees it you will already made your mistakes that potential will invalidate the exchange. (also your CPA can not perform that function anyways).

Hi … OBVIOUSLY, my intent was that the CPA be included/consulted with this PRIOR to doing it. Anyone would realize that they cannot help if the deal is already done. I can assure you that there are CPAs who DO know what they are doing. One of the reasons to consult your CPA (presuming it’s one you’ve been working with who knows your financial picture, and one who understands real estate transactions - including exchanges), is that they can guide you on the appropriate path of exchange or sale, etc. because they know your specific circumstances. If you are not doing the exchange simultaneously, then you need the facilitator as mentioned. That allows one to maintain the integrity of the 1031 exchange rules. Also, I was NOT suggesting that one’s CPA could accommodate the 1031 Exchange. It is extremely important to use a first class facilitator too. It’s like anything else - some are better than others. Get references from people you trust. If you can’t get any there - then do some research - go to some REIA club meetings - or ask here on the board. They don’t necessarily have to be in your city. Good Luck.

its uncommon for people to post on this board (and others) “gee, I just sold my investment and now I’m considering do a 1031 exchange”; that the origin of my comment

No need to be rude aak5454 :frowning: If you READ what the original post says – it says a POTENTIAL sale. I was posting in good faith hoping to help REFLA — not get a bunch of negativity or rudeness from some other poster. In any event - good luck to you all.