Capital Gains Taxes

[frogger]

Working towards Chapter 7 at this time. I do have the opportunity to sell some property that I have held for some time. With the proceeds, I can pay off the property, pay some other creditors, have some living expenses, etc.

I understand that this can be done provided that there are no creditors that are favored over others, so that should not be a problem.

The concern I have now is that if I sell several pieces of this property, it could create tax problems and possibly trigger the a.m.t. Selling the property will help short term, however will not solve my financial properties.

Does bk solve capital gains problems, or am I to be liable for them after I'm bk and broke? Selling some properties now would be beneficial for myself and my creditors, but I don't want to be hanging on the hook down the road.

Thanks in advance for any help.

[fltoo]

Short and long term capital gains will be taxed and this tax will not be wiped out in BK. Whether it triggers the AMT or not depends on your income. AMT might be phased out next year, I am not sure, have to check on that.

Can you exempt the land that you pay off if you file?

[frogger]

Short and long term capital gains will be taxed and this tax will not be wiped out in BK. Whether it triggers the AMT or not depends on your income. AMT might be phased out next year, I am not sure, have to check on that.

Can you exempt the land that you pay off if you file?

No, will not be able to exempt land. If I do sell, it would be short term helpful to me and definately helpful to creditors. However, due to some other things that have been sold, it will trigger AMT.

Looks like everyone is going to loose........

[fltoo]

Sorry, confused. Why are you selling some land off and paying off other property, as you stated, if the land is not exempted. ie: why are you paying off an asset that is not exempt?

What are you trying to accomplish? Maybe we can be of more help if we knew this.

Please forgive me for the following........LOSE, NOT LOOSE, LOL. It is NOT you personally, but if I see loose for lose one more time on this forum, I am going to punch the monitor. I even saw a post the other day where the poster stated a "loose, loose situation."

OK, just ignore me!

[frogger]

Please forgive me for the following........LOSE, NOT LOOSE, LOL. It is NOT you personally, but if I see loose for lose one more time on this forum, I am going to punch the monitor. I even saw a post the other day where the poster stated a "loose, loose situation."

Thanks for the spelling correction. I actually checked the dictonary to make sure and you are most correct. I'll try not to make that mistake again! I don't like to make mistakes in my spelling.

Now back to the subject at hand, and I'll try to be more specific.

I have around 50 pieces of real estate. Of those 50 or so, 10 have pretty good equity. Comparing payoff at the bank to what they can be sold for, there is a decent chunk of change between that spread. On the other 40 or so pieces of property, the situation is reversed and I am upside down.

None of these properties are going to be exempted, and really don't want for them to be. I could take the 10 or so that have value between payoff and market value and sell them. By doing that, it would give me more time before filing, more money to live on, more money to pay bills, etc. The downside as I mentioned would be the potential capital gains and amt to contend with in 2010.

If I could sell the property now, it would be beneficial to the leinholder, as they would get their value back, it would be beneficial to me as it would help me get things better in place, and today we would all win.

The downside to that is if I'm stuck with captial gains taxes or amt next year, then I'm screwed, for I won't have the money to pay them.

With that being said, does the original question now make any sense?

Does bk solve capital gains problems, or am I to be liable for them after I'm bk and broke? Selling some properties now would be beneficial for myself and my creditors, but I don't want to be hanging on the hook down the road.

Thanks in advance for your advice.

[fltoo]

At first, I thought you said you wanted to sell some to pay others off.

You can sell anything you want to before filing BK as long as it is for market value and you spend the money on living expenses. I did that and kept receipts in case they thought I went out and bought some luxury item.

And...it wasn't so much as me correcting your spelling , but I can't for the life of me understand why people on the net use loose for lose. I swear, it is rampant. LOL

[frogger]

You can sell anything you want to before filing BK as long as it is for market value and you spend the money on living expenses. I did that and kept receipts in case they thought I went out and bought some luxury item.

I am aware of this, but thanks for the info.

Let me ask the question in another way:

If I sell some property (at market value) and make money, it could possibly throw me into having the alternative minimum tax kick in, therefore costing me money later that I will not have. However, when I bk, I will be having a loss on all of the remainder of the property that I own. Can I use the complete loss of the other properties against the profits made on the sale of a few others to balance things out in order not to have tax burden?

[StartingOver08]

This is a good CPA question (and I don't mean consumer protection attorney!!)

[roozterdvx]

I'm no expert by any means...just thinking out loud...if I'm way off track then please excuse my ignorance.

Why sell any of the property?
What happens if all the property is listed in bk and deemed as sellable assets? I'd assume the trustee would take the properties and sell them and all the creditors get a piece instead of just the ones with positive equity.
Would this avoid capitol gains or AMT, (no idea what that is)?

[fltoo]

I am aware of this, but thanks for the info.

Let me ask the question in another way:

If I sell some property (at market value) and make money, it could possibly throw me into having the alternative minimum tax kick in, therefore costing me money later that I will not have. However, when I bk, I will be having a loss on all of the remainder of the property that I own. Can I use the complete loss of the other properties against the profits made on the sale of a few others to balance things out in order not to have tax burden?

Here is my take on it, but as SO says, you need to ask a professional.

Capital gains most certainly can be offset by capital losses when you sell. But, you are discharging debt on the properties you are not selling, so I would think that does not count as a capital loss.

As far as the AMT, it depends on your income and how many deductions you are taking against that income. I thought something was being done with the AMT in 2009, maybe adjusting it for inflation? I wish they would get rid of it.

The AMT is a joke, once put in to tax high income earners, now a thorn in the side to most middle income filers. There are a few things you can do to take a little edge of the AMT. Not a discussion for this thread, but google it for some ideas when filing.

This is an example of the problem when people cry, "tax the rich." Be careful what you wish because the government does not stay on top of these things and they eventually filter down to hurt the middle class! Again, not a discussion for this thread.

But, of course, don't listen to my rants. Ask a professional.

[frogger]

Why sell any of the property?

If I could sell some of the property without tax problems, it would enable for me to continue for a longer time without filing bk. I'm trying to get some time in on things in order to have them in the past. That's really the only reason.

To those of you that have responded, thank you. Didn't know if any of you might be CPA's, so I didn't have anything to lose (loose) by asking.

Thanks again! I'll be hanging around a while and asking more questions as they come up.

[fltoo]

Glad you had nothing to LOOSE, LOL.

[wilson9975]

One of the best ways is to directly purchase any property from the original owner, in this way you are also giving an option to repay his taxes and mortgage without going for a Tax deed sale or a foreclosure. You get a discount while buying and can certainly make good profits while selling it to the new buyer.

[music12]

why worry about it? if you are going to file, let the trustee handle the whole thing. if the trustee handles it, they probably can't do anything to cause you to have to pay additional taxes. further, they might not want to deal with it and just leave some of these properties with you.

but seriously, sounds like a complicated situation that you need a professional to answer. a bk and/or tax attorney.

[frogger]

I had a long talk with my tax professional about this, and he stated that pretty much anything owed to the IRS does not go away. Not capital gains, not AMT taxes, nothing.

We came up with a $$$ number that would work for me in capital gains, I have sold enough property to reach that, and the rest of it is just going to get listed when I file.

Once again, thanks for all the advice and spelling tips!