capital gains

Can anyone tell me how to calculate capital gains taxes? Is it a different rate for sales within one year of purchase?

Yes there is a long term capital gains rate for investments held over 12 months and there is a short term capital gains rate for investments held under 12 months… I am not sure what the current % are a local tax accountant or tax preparer will have them though.

Short term capital gains (property held <1 year) is taxed at a rate equal to the individual tax payers ordinary income tax level.

Long term capital gains (property held >1 year) are taxed at 15%.


So its sounds like a short term rehab and sale done in my personal name would be taxed the same as if it were considered business income through my LLc’s name?

An LLC is a “pass-through entity”…the earnings are taxed at the rate of the owner(s).


what is the best way to avoid cap gains entirely?

Three (legal) ways to avoid the capital gains:

(1) Keep the property.

(2) Die.

(3) Do a Starker 1031 Tax-free exchange to other property/properties.


If you want to lower your capital gains do as I was taught. Set up a holding company in NV and a property mgmt co in NV both as LLC’s. even though the property mgmt co is an LLC is will be taxed as a C-Corp.
Your property mgmt co will bill your holding co all of its profits. So at the end of the tax yr, the holding co made no money, so no tax…The property mgmt co, will be used to take all your business tax deductions allowable, such as medical, trips, supplies, meals, cellphone, car payment etc…Then at the end of the yr all those expenses are deducted from the income it made (how much the holding co made really) and then you can take alittle and put it in a SEP IRA (gotta save some for retirement) and then you can W-2 the rest to yourself since your the sole employee of the property mgmt co and just pay the whole tax in the LLC. Generally your looking at a tax rate of about 7.5% how it works.

yrush…his question was specifically about capital gains which are envoked at sale, not about the annual income stream…but your answer to that is a good one.


It is IMPORTANT to keep mind that IF a short term capital gain pushes your income to a higher tax bracket ALL your earned income (AGI) is taxed at the higer rate. Even from a regular job. schedule c company or llc.
Not just the earnigs from the ST gain.

Did I say that right becuase it happened to me last year?

One word GIFT!!!

You can do a one time gift to your husband/wife for $35,000.00

and $11,000.00 to any person up to 1 million in your liftime!! <---- go strait to the horses mouth or the Horses back side I guess when your talking taxes!!

(Is it comments like that that get me me in trouble with them?)

I don’t think this is correct. Part or all of the income may be taxed at a higher marginal rate, if it reaches the higher marginal rate. But it does not change the tax rate for all of your income.

One thing to watch out for, however, is that you can push your income into a level at which your itemized deductions start getting phased out and you can lose all or part of your child tax credit.

#1. LLC

A single member LLC can be taxed either as a sole proprietorship or as a corporation; further you can choose S- or C-Corp. A multi-member LLC is taxed either as a partnership or corporation.

The LLC taxed as a C- corporation will generally pay a lower inome tax rate, but any distributions will be subject to personal income tax (the “double taxation” issue).

The LLC taxed as a sole proprietor will be subject to both income and self employment taxes. This can get expensive.

The LLC taxed as an S-corp will be subject to income tax at your personal marginal rates, plus some level of self employment taxes. As a “general” rule, if the corp pays you a reasonable salary you can avoid the SE taxes on the rest of the income taken as a distribution. If you are expecting lots of income, taxing your LLC as an S-corp has benefits.

#2 Capital Gains

If this property is a flip then you are considered a dealer in this property. Income from its sale will be taxed as ordinary income regardless of how long you held it. If you’re selling a rental, then capital gains rules would apply. The capital gain decision would, of course, be in the context of whatever taxation method you chose for your LLC. In other words, corporate capital gains are taxed differently from sole proprietor (personal) capital gains. Then you have to consider whether the income is passive, etc.

#3 Holding Co

This will have no effect on taxes. All income is taxed somewhere, either within the LLC or personally. The only decision you can make is where and, therefore, how it is taxed. The capital gain decision is clear and based on the facts of your case, and is not flexible. Unfortunately, there is no legal way to “evade” taxation.

Mark Wagner, CPA