The Realized Team’s Picks
Can You Offset Capital Gains with Losses from Prior Years?
A realized loss during a year can mean a lower tax bill. This loss is generally offset against other gains or income. Some people refer to this as shielding taxable income. However, there are rules on how losses are applied against income. What about losses from previous years? Do the same rules apply? Let’s find out.
What Qualifies for a 1033 Exchange?
Ben Franklin famously wrote that, “in this world, nothing is certain except death and taxes.” While not a certainty, it can be expected that something bad will happen in a part of the country in which you live or hold investment real estate. Tornados, mudslides, floods, wildfires, hurricanes, and other natural disasters have become common seasonal events.
What is Ordinary Income?
Paying taxes on monies received can be confusing. This is because there are various ways in which you might receive funds.
What is Pro Forma in Real Estate?
The Oxford Language Dictionary definition of pro forma is "done or produced as a matter of form" or "a standard document or financial statement.” Similarly, the original Latin meaning is “for the sake of the form.” In contemporary usage, a Pro Forma is a cash flow projection for real estate investments. Pro Formas are typically forward-looking estimates of financial results. Real estate investors rely on the pro forma to analyze potential income and expenses.
Are Stock Dividends Taxed as Ordinary Income?
For many taxpayers, there is a substantial difference in the tax rate they pay for long-term capital gains versus the rate they pay for ordinary income. The tax rates on ordinary income range from 10 percent to 37 percent. In comparison, the rate applied to long-term capital gains income is between 0 and 20 percent. The income taxed at the “ordinary” rate includes salary and wage income, commission, bonuses, rents, royalties, short-term capital gains, interest, and unqualified dividends.
What is a Financial Power of Attorney?
Power of attorney is a legal instrument that allows another person to act on behalf of the individual who granted the power to them. While each state has specific rules governing the designation, in most cases, you can confer it on your selected agent by completing a legal, notarized form. While the documents must be notarized, usually, an attorney is not a necessary part of the process.
Can a Relative Be a 1031 Qualified Intermediary?
The successful execution of a 1031 exchange can allow an investor to defer payment of capital gains taxes. This tactic can help you leverage your investment capital, but to obtain approval from the IRS, you must carefully follow the rules governing the 1031 exchange transaction. If you make a mistake, the IRS may disqualify the exchange, resulting in you having to pay the capital gains taxes immediately.
How Does Depreciation Work When You Sell a Rental Property?
There are many costs involved when selling a rental property. One of those is related to depreciation. Where depreciation giveth, it also taketh away. The IRS will claw back some of the depreciation expense taken during the holding period. This isn’t just a simple number. Some calculations are involved in determining the amount of depreciation that investors must pay back at the time of sale.
Can 1031 Timelines Be Shortened?
The total time frame for a 1031 exchange is 180 days. The clock starts once the relinquished property closes. However, there are cases when the timeframe is compressed and doesn't allow for the full 180 days. Investors who are looking to do a 1031 exchange need to be aware of when they may not have the full exchange period available to them.
Is Raw Land a Good Investment?
Real estate investors have a multitude of choices - residential rentals, other commercial properties like office buildings and hospitality centers, retail operations, and more. Every class and sector offers potential pros and cons. Investors can also decide to purchase real estate-backed securities or fractional interests in asset portfolios by investing in REITs (Real Estate Investment Trusts) and DSTs (Delaware Statutory Trusts).
