ukrkoz
Contributing Member
Cash: $ 10.65
Posts: 49
Joined: 04 Nov 2010
Location: seattle
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Hi all
Here's situation.
We purchased a property, for primary residence, 2005, for $440K.
We started using that property, in 2005, as full rental.
Last year, we took $300K equity loan from rental property (it was paid for) as down payment to purchase 2 more rental properties.
We decided to sell that rental and have offer pending on it.
Offer is at $740K.
After all fees and taxes applicable, our disbursement will be $685K.
Out of which, far I know, escrow will pay off roughly $300K of that equity loan.
That, leaves us with $385K in proceeds.
Questions.
1. what exactly constitutes capital gain here? Difference between $685K and $440K? Is $300K paid towards equity loan reducing capital gain as, we do not, actually, receive $685K but, only $385K. Then how this stands against $440 paid for the property originally?
2. That in mind, if capital gain is $685K less $440K base= $245K, we will own 15% cap gain tax next year or, $36K. This makes us consider doing 1031 into yet another rental. Fine with us but. We'd like to buy $400K property then, to have it, pretty much, paid for by proceeds.
That brings me to a question I can't figure out. If we sold the property for $740K, netted $685K after all fees (less $300K loan paid back) - are we forced to buy $700Kplus property then? Or, say 2 $350K properties?
As, after fees and loan pay off, our REAlL proceeds will be only $385K, what is, actually, less than base.
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