Tax Advantages of Owning Real Estate / Edition 2

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More About This Textbook


Tax Advantages of Owning Real Estate is written for real estate licensees, attorneys, investors and owners, with emphasis on California transactions. The objective of this book is to fully provide buyers, owner-operators and sellers of real estate complete knowledge of the federal tax consequences that accompany all real estate transactions.

Many real estate decisions, particularly for sellers, are driven by the transaction's profit tax implications. Thus, it is important for buyers, owners and sellers of homes, business premises, income-producing properties and investment real estate to understand and apply tax rules in their real estate transactions.

For the broker or agent, advice about taxes, if made known, may hold strong influence over a client's decision to buy, sell, finance or lease real estate. To this end, Tax Advantages of Owning Real Estate discusses the advice brokers can and should give to a client regarding the tax consequences of real estate transactions.

On completion of this book, brokers and agents will be able to competently articulate various income tax consequences, analyze the application of federal tax rules to various real estate transactions, use worksheets to back up their advice, and represent buyers and sellers on ever higher-valued properties. Similarly, individual investors and owners will gain a firm understanding of the tax rules and financial implications of their real estate decisions.
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Product Details

  • ISBN-13: 9781933990071
  • Publisher: Transline Supply
  • Publication date: 5/28/2007
  • Edition number: 2
  • Pages: 410

Table of Contents

Table of Forms     v
Introduction     vii
Quizzes     369
Case Index     377
Code Index     381
Topical Index     389
Principal Residence Deductions and Exclusions
Home loan interest deductions: Two residences, two deductions     3
Deduction of points by homebuyers: Prepaid interest write-off exception     7
The principal residence profit exclusion: Tax-free sale up to {dollar}250,000 per person     13
1099-S on the sale of a principal residence: Seller certification eliminates 1099-S     21
Home office costs expensed: The costs and uses that qualify     23
Equity sharing co-ownership: The investor co-owner     29
Income Categories for Business and Investments
The sales price: Different views, different aspects     39
Income tax categories: The many types of income     45
Avoiding dealer property status: The owner's intended use of property     49
Interest write-offs on business and investment loans: Used to purchase, improve or carry costs     57
Depreciation and unrecaptured gain: Cost of improvements recovered     63
Commingling rental losses with other income: The part-time landlord     69
{dollar}25,000 ceiling on rental loss deductions: Subsidizing annual operating losses     75
The Taxation of Profit
Tiered tax rates for profits: The batching and taxing of gains     85
The profit tax rates: Put tax rates to their best use     95
Inflation and taxes: Uncle Sam creates his share     101
Short payoffs on recourse and nonrecourse loans: Discount reported as income or in price     109
Option money tax consequences: When exercised, expired or assigned     121
Understanding government tax publications: The federal tax system     125
Seller Financing Defers Taxes and Creates Income
Seller financing diminishes tax impact: Installment sale defers profit reporting     133
Minimum interest reported on a carryback note: Charge or impute a note's AFR     143
Prepayment penalties: A 25% bonus the seller will need     151
Installment sale reporting after due date extension: No taxable event on modification     155
A carryback note becomes worthless: Writing off an exhausted bad debt     159
Lease-option sale triggers profit reporting: Ownership deductions for the buyer     161
Foreclosing lender's profits and losses: A tax-free, note-for-property exchange     167
Introduction to [section]1031`
An investor's [section]1031 motivation: The tax-exempt sale by reinvestment     175
Duty to advise on the tax aspects: Disclosure of known consequences      183
The formal exchange agreement: Structuring a comprehensible transaction     199
[section]1031 Fundamentals
Like-kind [section]1031 property: real and personal: Qualified to sell or buy under [section]1031     227
The purchase and control of replacement property: Conduct connected to direct deeding     233
An installment sale coupled with a [section]1031: Profits: tax exempt and tax deferred     237
Vacation homes: Held for investment and personal use     243
Direct deeding and avoiding receipt: Preferable to sequential deeding     247
Reinvestment Scenarios
Estate building: equal-or-greater debt and equity: Variations of the price trade-up     261
An orderly liquidation: a trade-down in price: The partial [section]1031 transaction     279
Delayed Closing
A delay in the [section]1031 reinvestment: Identification and acquisition periods     301
A [section]1031 trustee for the delayed investment: Controlling the disbursement of funds     311
A cash sale and a [section]1031 reinvestment: Re-routing the sales proceeds     313
Profit and Basis in Replacement Property
The [section]1031 profit and basis recap sheet: Taxable profit on reinvestment     323
Basis in the replacement properties Setting the depreciation deduction     337
IRS [section]1031 form handles cash defectively: Netting the boot off form      345
Property Taxes
Replacement residence reassessment relief: Age 55 or older, equal or lesser price     353
Intra-family transfers avoid reassessment: Exclusion for gifts and sales     359
The masked transfer: buyer vs. broker: Hiding transactions from the assessor     367
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