Upon the sale of an appreciated real estate investment property that more than likely has had a decreasing cost basis due to depreciation, the investor will pay
1) A federal capital gains tax of as much as 20% 2) The Net Investment Income Tax of 3.8% 3) A 25% Depreciation Recapture and 4) A state capital gains tax.
In many cases, especially in high capital gains tax states, you could end up paying more than a third of your sales proceeds in various taxes. To make matters worse, this isn’t the only tax you will pay. If you’ve been extremely successful in your real estate acquisitions, you will upon your death have to pay an addition federal and potentially a state estate tax.
Remember my tax message is defer, defer, avoid!
In this chapter we discuss the Delaware Statutory Trust.
In Chapter 7 we discuss the incredible Cash Flow opportunity of a Residential Assisted Living Investment. What is a capital gains tax? A capital gain is the net profit made when a capital asset is sold. According to the IRS, almost everything owned and used for investment purposes is a capital asset. When the asset is sold, the capital gain (or loss) is calculated by subtracting the realized sale price from the adjusted basis.
There are four important terms to understand when determining a capital gain:
• Capital asset: stocks and bonds, equipment and
32
Powered by FlippingBook