| |
Baltimore
City -
Canton
Fells Point
Federal Hill
Baltimore
City N. -
Roland Park
Guilford
Homeland
Baltimore County -
Ruxton
Cockeysville
Lutherville
Hunt Valley
Greenspring Valley |
|
|
|
Calculating your Capital
Gain
"Analyze the benefits of an exchange
before you sell"
The real
power of a tax deferred exchange is not just the
tax savings - it is the tremendous increase in
purchasing power generated by this tax savings!
With the advantages of leverage, every dollar
saved in taxes allows a real estate investor to
purchase two to three times more real estate.
Many investors are surprised to discover that
capital gain taxes are far higher than 15%. State
taxes, which can be as high as 11% in some states,
are added to the federal capital gain tax owed.
In addition, depreciation deducted over the ownership
period is taxed at a rate of 25%. The net result
is often a large percentage of your profits going
directly to pay taxes. Under the 4th calculation,
the net equity times four (assuming a 25% down
payment) is the value of property you could purchase
after paying all capital gain taxes.
Under the 5th calculation involving an exchange,
no taxes are paid, leaving the full purchasing
power of the ENTIRE GROSS EQUITY to acquire considerably
more real estate! In just one transaction,
the Exchanger acquires far more investment property
than a seller!
Note: Asset Preservation, Inc. cannot give tax
and or legal advice. Every taxpayer should review
their specific transaction and potential tax consequences
with their own tax and/or legal advisors.
Compare the tax savings
of an exchange vs. a taxable sale
| |
1 |
Calculate Net
Adjusted Basis |
Original Purchase Price
+ Improvements
- Depreciation
= Net Adjusted Basis |
|
|
|
2 |
Calculate Capital Gain |
Sales Price
- Net Adjusted
Basis
- Cost of Sale
= Capital Gain |
|
|
|
3 |
Calculate Capital
Gain Tax Due |
Recaptured Deprection (25% )
+ Federal Capital Gain (15%)
+ State Tax (when applicable)
= Total Tax Due |
|
|
|
4 |
Analyze purchase - No
exchange |
- Cost of Sale
- Loan
Balances
= Gross Equity
- Capital Gain
Taxes Due
= Net Equity
Net Equity X 4 = |
|
|
|
5 |
Analyze purchase
- exchange |
Capital Gain Taxes Due
Gross Equity = Net Equity
Gross Equity x 4 = |
0 |
|
Information Provided
by
Asset Preservation,
Inc.
National Headquarters: 800-282-1031 or
info@apiexchange.com
This information is not intended
to replace qualified legal and/or tax advisors.
Every taxpayer should review their specific transaction
with their own legal and/or tax counsel.
© 2000 Asset Preservation, Inc.
|
|
|
|
