How to Pay Little or No Taxes on Your Real Estate Investments: What Smart Investors Need to Know - Explained Simply by Brian Kline & with foreword by Donna Cunningham & Realtor

Author:Brian Kline & with foreword by Donna Cunningham & Realtor
Language: eng
Format: epub
Tags: real estate, profit, investing, investments, smart, taxes, pay no taxes, secrets, assets
Publisher: Atlantic Publishing
Published: 2013-03-19T00:00:00+00:00

bearing a relationship to the taxpayer described in section 267 (b) or 707 (b)(1).

(4) Treatment of certain transactions

This section shall not apply to any exchange which is part of a transaction (or series of transactions) structured to avoid the purposes of this subsection.

This assumes that a third (unrelated) party is part of the replacement property transaction. If both the relinquished property and replacement property involve related parties, the two-year holding period applies to both. Exchanges with related parties are complex, and the complexity increases dramatically if boot or cash is involved.

It is especially important to obtain legal and tax advice from an experienced attorney if an exchange is being considered between related parties. The definition of related parties goes well beyond family members. Several business entities and relationships are involved.

Related parties under the rules are:

• Members of a family, including brothers, sisters, half-brothers, half-sisters, spouses, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren).

• An individual and a corporation of which the individual owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation.

• Two corporations that are members of the same controlled group as defined in §1563(a), except that “more than 50 percent” is substituted for “at least 80 percent” in that definition.

• A trust fiduciary and a corporation when the trust or the grantor of the trust owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation.

• A grantor and fiduciary, and the fiduciary and beneficiary, of any trust.

• Fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts.

• A tax-exempt educational or charitable organization and a person who, directly or indirectly, controls such an organization or a member of that person’s family.

• A corporation and a partnership if the same person owns more than 50 percent in value of the outstanding stock of the corporation and more than 50 percent of the capital interest, or profits interest, in the partnership.

• Two S corporations if the same person owns more than 50 percent in value of the outstanding stock of each corporation.

• Two corporations, one of which is an S corporation, if the same person owns more than 50 percent in value of the outstanding stock of each corporation.

• An executor of an estate and a beneficiary of such estate, except in the case of a sale or exchange in satisfaction of a pecuniary bequest.

• Two partnerships if the same person owns directly, or indirectly, more than 50 percent of the capital interests or profits in both partnerships.

• A person and a partnership when the person owns, directly or indirectly, more than 50 percent of the capital interest or profits interest in the partnership.

The basic concept is to prevent individuals or businesses from establishing business relationships specifically for the intention of exchanging a property to themselves as owner of another business entity. If this can be accomplished, it is possible for

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