Tax Time Has Tax Consequences

HurricaneIt’s only twenty days until April 15 hits with a powerful punch for some of you.  Have you figured your tax consequences to your 2007 activities yet?  Or has your CPA? 

Real estate investing can be very lucrative, tax wise and otherwise, if done correctly.  I’m going to publish an email I received this morning, anonymously of course, from a client I’ve sold a couple of properties for.  He’s owned property for 4 decades but sold off his final property in 2007.  Now before you cry for him, he knew how his actions would affect his taxes BEFORE selling because we discussed it.  And because he’s sold without exchanging before.  Money should not be an issue for him for the rest of his life.  🙂

Oh, and I love the milk analogy. 

Chris,
Nice shirt, nice color, nice thought.

Glad to see your keeping a visible presence with your past clients. Who knows when I may come back to make more money in real estate.

Just finished doing my taxes and had a refresher course  on recapture of depreciation  and capital gains. On the recapture I can understand Uncle Sam saying you did not pay taxes on that value you said was depreciating but it did not depreciate, so pay me now. That is only fair.

One thing I do not understand however is capital gains. You see when I bought my Duplex, milk was selling for $1 a gallon. When I sold the duplex milk was selling for $ 3 a gallon. My duplex sold for 3 times what I paid for it so I could by the same amount of milk today now as when purchased the duplex. But Uncle Sam says I had a Gain and wants a tax  that gain. I did not gain purchasing power just an inflated number. If I were to use the price of gasoline there would be loss of purchasing power.  Nothing you or I can do about this fact but grin & bear it. 

The good news however was that all that inflated gain was paid for by rental payments made by others.
So there is some money to be made in Real Estate. With inflation about to go gangbusters in the near future one needs to keep hard assets like Gold & Metals ( which do not pay dividends) or Brick & Mortar (also know as housing) which can produce dividends known as rent.
Ciao;Name withheld

Last week I recommended you read Jeff Brown’s article on how to figure your basis.  You’ve just read a real life email on how your basis relates to you in real life.  And did you catch my most favorite sentence in that whole email? 

The good news however was that all that inflated gain was paid for by rental payments made by others.
Oh, how I do love Principal Reduction.  Now go do your taxes!

2 Comments

Filed under Real Estate Investor Interview

2 responses to “Tax Time Has Tax Consequences

  1. Simply put — that email and the way you work with clients is pure gold.

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