"Marks, Michael D." <MIKE.MARKS@domtar.com> wrote:
I'm not an investor, nor am In the business of selling or buying land. I am a mechanic. my problem is this, in 1994 I bought 80 acres of land for $24,000.00, I sold this land about 2 weeks ago for 160,000.00. other than putting the money in a saving account I don' have a clue. can you tell me what my next move should be? what are capital gains taxes, I've been reading on your web site any advice will be highly appreciated.
Well -- hopefully, you talked with an intermediary about this sale FIRST. If you touched the money, you will most likely owe capital gains taxes. If you haven't gone to settlement, then call the settlement company and request an 1031 intermediary company now. T
he way this works is that the intermediary charges a fee to the investor/seller to handle the transition of money. At settlement, the proceeds are directed to an account held by the intermediary who then forwards the money to your next purchase (which must be of equal or greater value than the house you're selling). Thus, your next purchase will need to be at least $160,000; however, it doesn't have to be one property. You could buy two rental properties now or a warehouse, etc. It just has to be real estate.
If you need money from the transaction, then one technique is to complete the transaction; purchase the next property; then refinance the property immediately with a cash-out refi.
On the other hand, if your intention was to take the money and run, then you WILL owe capital gains taxes.
Internal Revenue Services Publication: Selling Your Home - http://www.irs.gov/pub/irs-pdf/p523.pdf
- Like-Kind Exchanges - Real Estate Tax Tips: http://www.irs.gov/businesses/small/industries/article/0,,id=98491,00.html
- Realty Exchange Corporation: http://www.1031.us
For more information on real estate investing, resources and news, check out my Commonsense Real Estate Blog at http://commonsenserealestate.blogspot.com/.