REAL ESTATE Q: lam in the process of selling an investment property and am worried how taxes on the gain will affect the amount I will have to reinvest. I was told to look into a 1031 Dick Phelps Exchange. How would that help? A: The gain in the sale of a property other than your homestead is open for taxing. It is considered a Capitol Gain and would be taxed at the current Capitol Gains rate. When you pay this tax, it reduces what you then have to reinvest. There is a method that can be used to legally delay taxes on gain. In a nutshell, you have to pay the taxes on the gain you receive. If you do not receive the gain, you do not have to pay the taxes. How can you accomplish this yet still have the gain? The arrangement you set up is that instead of going directly to you, the gain is directed to an intermediary, which holds the money until you find a like-kind property to purchase and at which time this intermediary company then funds the purchase with your money they have been holding. In practice, you are not receiving the funds, but merely exchanging one property for a like-kind. Having never received the funds, you are not liable for taxes on the gain. For example, lets say you were looking at a $400,000 gain. Tax liability could be approximately $140,000 in combined taxes; leaving $260,000. Using that for an investment, needing $25% down, you would be eligible for $1,040,000 replacement property. Choosing the 1031 Exchange you would have the entire $400,000 available and be eligible for $1,600,000. See your tax accountant or financial advisor for advice before venturing into any process as this. Your Realtor can help you find a good 1031 Exchange property. Centur For Questions Contact: Dick Phelps 218-766-5263 e rphelps@century21dickinson.com DICKINSON REALTORS REAL ESTATE Q: lam in the process of selling an investment property and am worried how taxes on the gain will affect the amount I will have to reinvest. I was told to look into a 1031 Dick Phelps Exchange. How would that help? A: The gain in the sale of a property other than your homestead is open for taxing. It is considered a Capitol Gain and would be taxed at the current Capitol Gains rate. When you pay this tax, it reduces what you then have to reinvest. There is a method that can be used to legally delay taxes on gain. In a nutshell, you have to pay the taxes on the gain you receive. If you do not receive the gain, you do not have to pay the taxes. How can you accomplish this yet still have the gain? The arrangement you set up is that instead of going directly to you, the gain is directed to an intermediary, which holds the money until you find a like-kind property to purchase and at which time this intermediary company then funds the purchase with your money they have been holding. In practice, you are not receiving the funds, but merely exchanging one property for a like-kind. Having never received the funds, you are not liable for taxes on the gain. For example, lets say you were looking at a $400,000 gain. Tax liability could be approximately $140,000 in combined taxes; leaving $260,000. Using that for an investment, needing $25% down, you would be eligible for $1,040,000 replacement property. Choosing the 1031 Exchange you would have the entire $400,000 available and be eligible for $1,600,000. See your tax accountant or financial advisor for advice before venturing into any process as this. Your Realtor can help you find a good 1031 Exchange property. Centur For Questions Contact: Dick Phelps 218-766-5263 e rphelps@century21dickinson.com DICKINSON REALTORS