Let’s see a possible scenario:
You, a real estate agent, list and sell a property; all is well at both ends of the transaction, the purchase and the sale. The deal is closed: he gets paid, end of story, that’s what he thinks.
What happens when the client on your listing files their taxes only to find out they owe thousands of dollars in capital gains taxes? Your customers have done a complete 180, from being happy, satisfied customers to angry people.
What can you do as a Realtor to avoid this situation? Know the section codes 1031/1034 or contact a professional who knows them.
First, know that IRS Code 1034 gives all single persons in owner-occupied property a $250,000.00 capital gains exclusion every two years, and a married couple a $500,000.00 capital gains exclusion in occupied residences. by the main owner. The client must have lived in the property for two years. If they have lived in the property for more than two years, have never lived in the property, or have chosen to rent the property, they should consider an IRC Section 1031 instead.
What if you are selling an investment or vacant land? How can we reduce the capital gains taxes owed to the IRS?
It’s pretty simple. You can make an exchange under section 1031 of the Internal Revenue Code. This 1031 exchange allows you to defer paying capital gains tax until you have disposed of the replacement property without exchanging it. The IRS allows you to exchange properties of the same type for similar value. During a 1031 currency exchange, other assets may also be included in the exchange. The cash involved in the exchange may be taxed.
Here are some questions to ask your customers:
Have you spoken to a qualified tax advisor regarding a 1031 exchange?
This is the key to serving your customers better by offering a higher level of customer service. Have them discuss your options fully with a tax professional. If your professional is an accountant, tax attorney or EA registered agent (licensed to practice before the IRS) they can and should represent their client if the need arises before the Internal Revenue Service in the event of an audit. It is imperative that the advisor structure the exchange appropriately to ensure that the transaction complies with IRS rules and regulations and is appropriately applied to their client’s situation.
Do you live on the property? If so, how long did you live there?
Do you want to buy another property? Your client should be aware of the benefits of IRC 1034/1031 codes.
Plan to work with your tax professional today. It is better to be prepared and have the experts on hand. Often when customers are left to look up their own information, it can be left in the background or often iterated incorrectly, so the answers they get may be correct, but not the answer to what they really needed. .