November  2003   [an error occurred while processing this directive] [an error occurred while processing this directive]   Partial Tax-Free Exchange
  Sale of Residence - Owner in Nursing Home
  IRA Early Withdrawal
  NRA owns U.S. Corp
[an error occurred while processing this directive][an error occurred while processing this directive] [an error occurred while processing this directive] I plan to sell investment property worth $400,000 and do not want to use the tax-free exchange provisions of Section 1031 because I want to pay off my car loan with some of the proceeds. How can I do this without paying 25-30% in taxes? [an error occurred while processing this directive] You are taxed on your gain and your gain is based on the adjusted basis of your property (what you paid for it, plus improvements, minus depreciation). Consider a partial tax-free exchange. Cash out only the money you need to pay the auto loan and use the balance to acquire replacement property, with a mortgage at least as high as your current mortgage. Otherwise, consider selling on an installment sale to stretch out the tax obligation over several years. Unless you use the tax-free exchange provisions, you'll owe tax on the sale. [an error occurred while processing this directive] Tax Prophet's Tax Class on Real Estate Taxation [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] We put our Mom into an assisted living facility. Her home is on the market and has appreciated quite a bit over 40 years. Dad has passed away. What are the tax consequences if we sell the home? [an error occurred while processing this directive] Your mother cannot use your deceased father's $250,000 exclusion; however, she can use her own if she sells her residence while living in a nursing home.

Upon your mother's death, the home receives a basis step-up to fair market value. There will be no gain unless the home is later sold for more than the FMV at date of death. The current estate tax exemption is $1 million ($1.5 million in 2004), so if the gain from the sale of the residence exceeds $250,000, but the entire value of your mother's estate is less than the estate tax exemption amount - then consider waiting until after her death to sell the property. To avoid probate, the property should be held in joint tenancy or placed into a revocable trust. [an error occurred while processing this directive] Tax Prophet's Tax Class on Sale of 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] I want to make an early withdrawal from my IRA to invest in real estate. What would be my tax consequences? [an error occurred while processing this directive] You add the amount of withdrawal to your income. If you file a joint tax return (consider this only if you run the numbers jointly and married filing separately), you pay income tax on the amount of withdrawal plus a penalty of 10% of the amount withdrawn. For instance, if you withdraw $50,000, you pay taxes on the $50,000 added to your income, plus a penalty of $5,000. [an error occurred while processing this directive] Tax Prophet's Section on Estate Planning [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] Does a Delaware Corporation owned entirely by a non-resident alien have to pay any federal taxes in the US on stock trades conducted solely by the NRA shareholder? [an error occurred while processing this directive] Yes. Without understanding more about the structure, this seems like a bad idea. NRAs do not pay federal taxes on gains and losses from stock sales; however, a U.S. company will pay taxes on such trades. The NRA should operate as an individual or as a foreign corporation. The location of the broker who merely executes trades, in general, is not relevant. The highest federal corporate tax rate of 35% applies and there is no capital gains deduction available. [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]