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Capital Gains Tax Solutions Summary

Bank vault in the shape of a dollar signThis section serves the needs of investors who face any capital gains tax situation--"regardless of whether it is the result of the sale of property or a business, the maturity of the principal on a note, a large sale of stock, or even certain debt forgiveness situations.

Capital Gains Tax Worksheet and Example: This worksheet allows an investor to calculate their potential capital gains taxes on a particular transaction--whether real estate or otherwise. We would be happy to provide you with an electronic copy upon request. Please email clientservices@jrwinvestments.com or call (877) 579-1031.

1031 Real Estate Exchange: The 1031 real estate exchange is a tax-deferral strategy applies to investors who have sold or are about to sell investment real estate. This strategy allows a client to avoid paying taxes on all sales proceeds that are reinvested into other investment real estate as long as they 1) do not take constructive receipt of the funds within the exchange transaction and 2) meet all of the guidelines outlined by the IRS.

721 Real Estate Exchange: The 721 real estate exchange is another tax-deferral strategy, which applies to investors who have sold or are about to sell investment real estate. This strategy is similar to the 1031 exchange but allows an investor to exchange his property for an interest in a diversified portfolio of real estate called a "Real Estate Investment Trust (REIT)". As with the 1031, the client must not take constructive receipt of the sales proceeds within the transaction.

Deferred Sales Trust: This tax-deferral strategy applies to many different capital gains situations, including the sale of a business, real estate, stocks, or bonds, as well as the maturity of principal on a note or carry-back, and it even applies in certain debt forgiveness situations. The Deferred Sales Trust is different from the 1031 and 721 exchanges in that it does not require any particular reinvestment of the sales proceeds into real estate. It is similar to 1031 and 721 exchanges insofar as an investor cannot take constructive receipt of the funds within the transaction.

Tax Write-Offs and Credits: Like the Deferred Sales Trust, tax write-off and credit strategies can provide solutions to a multitude of capital gains tax issues beyond just real estate. These types of strategies even can be applied against ordinary income or the alternative minimum tax. Unlike the 1031 or 721 exchanges or even the Deferred Sales Trust, a client can take constructive receipt of the sales proceeds and still implement an effective tax shelter. Moreover, as the name suggests, clients are able to write off or cancel their tax exposure with these types of investments, rather than only defer the exposure (as with the other strategies).

1033 Real Estate Exchange: This tax-deferral strategy applies to investors who face involuntary conversion of their property (typically related to eminent domain or destruction by natural disaster). The 1033 real estate exchange allows an investor to avoid paying taxes on all conversion proceeds received as long as those funds are reinvested in "like-kind" real estate within the timeframe given. The investor can take constructive receipt of the funds and has a longer timeframe to make the reinvestment.

 

Written By: Joshua Ungerecht
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