January  2004   [an error occurred while processing this directive] [an error occurred while processing this directive]   Rental to Residence Conversion
  Sale of Corporation for Stock
  Choice of Entity for Real Estate Transactions
  Sale of Residence - Owner not on Record Title
  U.S. residence with a Foreign national as Part-Owner.
[an error occurred while processing this directive][an error occurred while processing this directive] [an error occurred while processing this directive] My wife and I have owned rental property for 15 years. We plan to remodel and move into the property ourselves. How do we change our residency to the rental address? [an error occurred while processing this directive] Consider making the improvements and repairs while the property is still a rental, the repairs will be deductible expenses. To play it safe, consider renting out the property for a time after the renovations to ensure that the property was indeed a rental during the time the repairs were made.

Thereafter, move into the property and treat it as your principal residence - use the address for bank and credit card statements, voter and vehicle registration, driver's license, bank checks, voting address. You must live in the property for at least 24 months during the 5-year period prior to sale. Remember, you'll have depreciation recapture taxed at 25% for the amount of depreciation claimed or allowable after May, 1997. [an error occurred while processing this directive] The Tax Prophet's Tax Class on Principal Residence [an error occurred while processing this directive][an error occurred while processing this directive][an error occurred while processing this directive] [an error occurred while processing this directive] What happens when a C Corporation is sold to an existing public company? There will be no cash paid; stock in the acquiring company will be given in exchange for all stock in the C Corp. [an error occurred while processing this directive] If the transaction is structured as a tax-free reorganization, there will be no tax consequences to the selling shareholders who receive stock as long as they continue to hold the stock in the acquiring corporation. Receipt of cash generates capital gains or losses. Of course, once the stock is sold, the shareholders will recognize either capital gains or losses. [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] I would like to establish a business entity to buy and sell properties. Also, I recently purchased real estate that I hope to sell without incurring taxes. Is this possible? [an error occurred while processing this directive] Yes. Consider an LLC as the entity since there is not an entity level tax. Use the tax-free exchange provision of IRC Sec. 1031 to avoid paying taxes. The tax-free exchange provisions apply when you transfer like-kind property held for investment for replacement property also held as an investment. Any cash received or relief of indebtedness on the transferred property fall outside IRC Sec. 1031 and you'll have a taxable transaction as to those amounts. Also, if you sell property and purchase a replacement property, IRC Sec. 1031 will not apply - so be careful. [an error occurred while processing this directive] Tax Prophet's Tax Class on Real Estate [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] I bought a condominium unit as my residence 24 months ago when I held a student visa. I put title in the name of my friend because I could not qualify for a loan. Now, I would like to sell my unit, but I heard the gain will be taxed at 36% since the property is considered investment property. Is this true? [an error occurred while processing this directive] Probably. You must own and live in the residence for at least 24 months before the residency exclusion applies. There could be exceptions if you had to move due to unforeseeable circumstances - see my articles on residency on this topic. You could be considered a non-resident alien if you are here on a student visa in which case, the foreign withholding rules (10% of the gross) applies. Note: Federal long-term capital gains are taxed at 15% so I'm not sure where you get the 36% figure. [an error occurred while processing this directive] Tax Prophet's Tax Class on Real Estate [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] A U.S. taxpayer (80%) and Mexican resident and citizen (20%) want to purchase a property together in California. The property will be the residence of the U.S. taxpayer. What are the tax consequences if the property is sold in 2 years or the Mexican owner dies? [an error occurred while processing this directive] In general, the non-resident alien is subject to California and Federal withholding taxes of approximately 13.3% on the "gross" sales price relative to his 20% interest. If he dies, the NRA's estate is subject to probate in California. In addition, if the size of the U.S. estate exceeds $60,000 there could be federal estate taxes owing. The residency exclusion rules should apply to the U.S. owner as to his 80% share of the property, provided he owns and lives in the property as his principal residence for at least 24 of the 50-month period prior to sale. [an error occurred while processing this directive] Tax Prophet's Section on Foreign Taxpayers [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive]