LandInvestors.com Forums **Ask A Question** Long term capital gains for tax benefits

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    Milan
    Participant
    Post count: 530

    Is that true that if you hold a land for a year or so you’ll get an long term capital gains tax benefit? Not that I plan to, but I’m just interested to know. I’m sure that successes like for example Luke are going to be hit by pretty big tax bill.

Viewing 6 replies - 1 through 6 (of 6 total)
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  • Chaz Albrecht
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    Post count: 120
    Pro

    I’m also interested in this. I hate paying taxes..

    Kathleen DeNault-Ridge
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    Post count: 140
    Pro

    hmmmmm…the tax implications are something to think about…a good accountant is an important member of your team!
    The other things I would be interested in would be the benefits of using an SDIRA or Solo 401k in which to purchase and sell properties….both in terms of capital gains and overall tax benefits.

    Chaz Albrecht
    Participant
    Post count: 120
    Pro

    I have heard of using a SDIRA and 401k but haven’t really looked into them. Aren’t these options better for cashflowing the land instead of flipping?

    Milan
    Participant
    Post count: 530

    Yes there are few obtions for optimizing your tax bill from buying land.

    Self directed IRA is one. There is a great book about it I just purchased – guide to self directed IRAs I don’t remember the name if the author – book is boring as hell but informative.

    Than there is what Chaz mentioned. Selling on terms not flipping all for cash. Or combination of it.

    And there is also something this: QRP account. http://www.qrp.org

    Off course if you run it as a bussiness, you can putt most of your profits into SepIRA tax free I think. There is limit like 50K or so.

    I think the answer is combination if strategies. You want to flip too so you have cash to acquire land. But as the Jill and Jack program says – it’s a cash flow from land. That should be bread and butter. And that by itself is tax efficient I believe.

    Joe K
    Participant
    Post count: 68

    Yes, you will be subject to the ST capital gains tax which usually is taxed at your income rate; however there is a limit to it (I believe it’s 20%). But, if you do hold the property for more than one year, you are taxed at the LT capital gains rate which is a bit lower

    Source: Me, I prepared tax returns for a while. However, I would ALWAYS run this by a tax accountant to plan and confirm for your own situation.

    Mike
    Participant
    Post count: 52
    Pro

    Here’s where you need a cpa and an attorney to weigh in.
    And I am NOT either one so take this for what its worth – i.e. very little.

    So technically, if you are an S corp, couldn’t you buy and sell under the corporation name.
    Then have the corporation pay you a salary thats lower than what the company actually made but reasonable
    for the work you’re doing – and then you’d only be taxed on the remaining profits as a distribution which
    is far less than as a dealer where you have to pay self employment taxes.

    Here’s what I think would be the difference:
    If you buy under your personal name and sell for a 5k profit, you’re paying regular income taxes on that 5k PLUS all the self employment taxes on it as well (15% more?). I think social sec is 12% and medicare 3%?

    Same 5k in profit if you buy under your corporation..
    If you buy under your corporation and your corporation pays you $200/week (20/hr x 10 hrs a week), then you would only pay the self employment taxes on the 800 a month but the remaining 4200 is taken as a distribution and flows through to your personal return so you only pay regular income tax on that profit and save the 15% or so.

    Not exactly avoiding taxes – thats tough. But saving 15% on a nice size chunk of it isn’t bad.
    Adds up. On 5k a month, that would be 750/mo.

    I do know that if you do that, you want to make sure you pay yourself something reasonable based on your time.
    If you try paying yourself a dollar an hour, they’re going to ding you.

    But again, thats just what I understand based on being a contractor at one point.
    Need to check with attorney and cpa as I am not one.

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