Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Question on selling land
Old 08-11-2017, 01:49 PM   #1
Dryer sheet wannabe
 
Join Date: Dec 2015
Posts: 18
Question on selling land

We bought some land to retire to and now a neighbor is trying to buy it from us at a good profit. We would only sell if we could buy something comparable. Question is would we owe short term profit gains on it if we were to immediately buy another property? This is a second location not were we live now. We would double our money but it will take all of that to buy something similar.

Thank you....
retired2015b2d is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-11-2017, 01:57 PM   #2
Thinks s/he gets paid by the post
DrRoy's Avatar
 
Join Date: Dec 2015
Location: Michigan
Posts: 4,962
From what I have read, if you bought the property for "personal use" then you would not owe taxes. If you bought it as an investment then you would. I wonder though, if you would just have to sink it all back into another property, what is the point?
__________________
"The mountains are calling, and I must go." John Muir
DrRoy is offline   Reply With Quote
Old 08-11-2017, 02:11 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,264
Quote:
Originally Posted by DrRoy View Post
From what I have read, if you bought the property for "personal use" then you would not owe taxes. ....
NO!!!

It doesn't matter the purpose.... if you own property and sell it you will need to report it and owe tax on any gain. The sale proceeds may also be reported to the IRS so they can make sure that you report the sale.

If owned for less than a year then it will be ordinary income (short-term capital gain) but if owned for a year or more it would be a long-term capital gain.

If the OP is sure that it would cost them at least as much as what they are selling the property for to acquire a similar property then I don't see any benefit for the OP.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 08-11-2017, 02:14 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 17,203
Quote:
Originally Posted by pb4uski View Post
NO!!!

It doesn't matter the purpose.... if you own property and sell it you will need to report it and owe tax on any gain. The sale proceeds may also be reported to the IRS so they can make sure that you report the sale.

Yes.... it is a taxable transaction...

But to OP... the gain being LT or ST is based on how long you have owned it, not how quickly you buy something else...
Texas Proud is offline   Reply With Quote
Old 08-11-2017, 02:29 PM   #5
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
You can avoid any capital gains by doing a 1031 exchange. It sounds like this may be a perfect transaction for it, depending on the amount of your gains.

With land, you are mostly on the honor system of reporting any gains. No one will issue a 1099.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 08-11-2017, 03:29 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 10,335
“No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.”

IOW, a 1031 exchange does not apply to property held for personal use such as the OP describes. I would suggest contacting a tax-oriented CPA to determine the risk and the probability of getting away with the exchange anyway.

I have done these a couple of times and it is a PITA for the seller of the land the OP is buying. It will also result in extra legal and accounting fees for both the OP and the person who sells to the OP. That is not to say don't do it, but it is a consideration.

If the OP has another piece of land in mind, I would put the burden on the neighbor who wants to buy the OP's land. "If you can get me that replacement land at a net cost to me, incuding income taxes, of zero then I will do the deal."
OldShooter is offline   Reply With Quote
Old 08-11-2017, 03:56 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 17,203
Just a point on the exchange... and not sure if you can do it anymore.... but back in 2000 you could put the money your received from the sale of the land into a trust and buy the replacement at a later date... IIRC there were some that went two years before purchasing....

Maybe someone knows the rules and if it is still available... a small cost to have the funds deposited at a bank who runs the trust (think escrow)....
Texas Proud is offline   Reply With Quote
Old 08-11-2017, 06:38 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
I recently sold some rural land with a 1300 sq foot house on it to someone who was doing a 1031 out of another property. Easiest thing I ever did, Smooth, fast and no nit picking.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 08-11-2017, 07:19 PM   #9
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
Quote:
Originally Posted by OldShooter View Post
“No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.”

IOW, a 1031 exchange does not apply to property held for personal use such as the OP describes. I would suggest contacting a tax-oriented CPA to determine the risk and the probability of getting away with the exchange anyway.
The OPs property, by definition, is an investment, unless it was used for personal use greater than 14 days (i.e. recreation). Simply holding land is not personal use no matter what the future intention is.

A 1031 exchange to a different parcel, assuming the new parcel will not be used personally for two years, is a valid 1031 exchange.

I am going to sell two rentals and buy a single vacation rental that I will use myself for two weeks a year, and will also use it while I do any repairs or rehabs. During prime season, it will be rented by the week.

After two years, I can use the vacation property as a personal residence, as much as I want, and rent it for 14 days a year, tax free. The 14 days should pay the real estate taxes at least (which are also deductible...)
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 08-12-2017, 08:17 AM   #10
Thinks s/he gets paid by the post
euro's Avatar
 
Join Date: Oct 2015
Posts: 2,307
I think the Senator is right on that, but as he says, the exchange WILL prevent you from using the land for 2 years. I assume there is some specific point of you wanting to own this land (i.e. plans to build your dream home or something), so you'll need to take that into account.
euro is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Selling Land with Timber--Who can help structure this in a smart way? samclem Other topics 11 02-22-2015 09:32 PM
Retirement Land Lazarus Other topics 63 02-13-2007 06:23 PM
Land of the Free?? haha Other topics 6 07-08-2005 05:09 PM
Trailer Home with Land or Small House...You Decide daystar Young Dreamers 18 12-04-2004 10:20 AM
Raw land returns? brewer12345 FIRE and Money 11 11-08-2004 02:45 AM

» Quick Links

 
All times are GMT -6. The time now is 12:46 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.