ANSWERS: 1
  • If you held this raw land for investment purposes AND you are going to reinvest the proceeds from the sale of the raw land back into some other kind of investment real estate (raw land, rental house, a commercial property) - then you would be able to do a 1031 exchange (Section 1031 of the IRS tax code) and defer paying the capital gains tax. A 1031 exchange allows you to defer the capital gains tax when you sell an income, investment, or business property and reinvest the proceeds into another income, investment, or business property. There are important time lines and rules involved. You need a qualified 3rd party (not your attorney, accountant, etc.) to facilitate the exchange, and this 3rd party must hold the proceeds from the sale for you until you purchase a "replacement" property. These 3rd parties are known as Qualified Intermediaries. Check out http://www.irs.gov/businesses/small/industries/article/0,,id=98491,00.html (the IRS's article on 1031 exchanges) or http://www.1031taxinfo.com has some great information, too.

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