DEAR BOB: How many times can I do Internal Revenue Code 1031 exchanges with my investment properties? How often are these exchanges allowed? – Baxter T.
DEAR BAXTER: Your questions are too easy. Don’t you have a more challenging real estate query?
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The easy answer is there is no limit to the number of times or the frequency you can use IRC 1031 to pyramid your real estate wealth without paying capital gains taxes along the way.
Unlike Internal Revenue Code 121 for selling your principal residence and claiming up to $250,000 tax-free profits (up to $500,000 for a married couple), which can only be used every 24 months, IRC 1031 has no time frequency limitations.
Theoretically, you can buy an investment property shack, fix it up to increase its market value and make a tax-deferred IRC 1031 exchange for a larger run-down shack within a day. Then you can make another tax-deferred exchange again, a day later, for a larger property.
There is no limit to the number of times you can use IRC 1031 or the frequency if you qualify for the simple tests of trading equal or up in both property value and equity without taking out any taxable “boot.” Details are in my special report, “How to Exchange Your Way to Tax-Deferred Real Estate Wealth,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com.
HOW TO GET RID OF A TIMESHARE
DEAR BOB: As a former timeshare victim, I greatly enjoyed your recent expert advice on how to get rid of that offshore timeshare. I’m a stupid buyer of both an offshore timeshare and one in Florida. Getting rid of the offshore timeshare was easy. I just stopped paying the annual fees. It “went away” without any adverse result. But getting rid of the Florida timeshare was far more costly. I tried listing it (for stiff fees) with two of the reputable-sounding but thoroughly crooked timeshare marketing companies. I was lured by a famous real estate franchise name of one of those firms. I just wanted to sell for any price to get rid of the obligation. No luck. Finally, I convinced my nephew that he and his wife would enjoy taking over my Florida timeshare payments. So far, so good. But if he defaults, the timeshare company can harm my credit by reporting I’m a deadbeat because my name is still on the timeshare – Bruce W.
DEAR BRUCE: Thank you for sharing your timeshare woes. Although a few readers write with their happy timeshare experiences, most letters are like yours from readers who can’t get rid of their timeshares even at huge losses.
INHERITED PROPERTY ALWAYS RECEIVES A STEPPED-UP BASIS
DEAR BOB: My father says when he dies I will inherit his house. I don’t want to seem too eager, but should I be concerned about how he holds title to the house after my mother died about five years ago. What is this “stepped-up basis” you often mention? – Marc H.
DEAR MARC: Inherited property receives a new stepped-up basis of its market value on the date of the decedent owner’s death (or alternate valuation used by the deceased’s estate).
That’s why you will probably be better off inheriting your father’s house than receiving it as a gift before he dies. If he tries to deed it to you before his death, as a donee you will then take over his probably low adjusted cost basis.
You will be much better off receiving the house with a new stepped-up basis of market value when your father dies. For more details, please consult your tax adviser.
The new Robert Bruss special report, “Pros and Cons of Flipping Houses and Investment Properties for Fast Cash Flow Profits,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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