Real Estate situation

Here is the situation....

Sold a piece of property (just a buildable lot) june, 2005, and financed for the family for 3 years. Note due june, 2008.

At that time, I need to know what options are out there to minimize the tax consequences.

Suggestions so far:

1. Take the money and roll it over into our primary residence mortgage.
Pros: No taxes taken out since it is our primary
Cons: Does nothing for our current financial situation (ie. doesn't lower payment, give us more freedom, etc)

2. Take the money and roll it over into our rental property. Would actually pay off that mortgage and have some left over.
Pros: No more payment on the house and the renters would pay what they pay and we can keep it all each month.
Cons: QUESTION: IS IT LEGAL TAX WISE TO ROLL INTO A SECOND RESIDENCE AND CAN YOU AVOID THE TAXES?

3. Take the money, have him make the check to us and pay the taxes and be left with 60-65% of the amount.
Pros: Financial liquidity
Cons: TAXES TAXES TAXES

thanks.....let me know your thoughts and other options.

 

First thing you need to do is determine your taxable basis in the property you sold and compare that to the proceeds you are to receive from the sale. The entire amount is not taxable only the gain (sales price less basis).

If the property is adjacent to your primary residence then you can count that as part of the sale of your primary residence if you sell your primary residence within the next two years. In that case it is tax free. If you do not plan to sell your current residence then you can not "roll it into your primary".

Not know the dollars involved I would probably take the tax hit and then use the money as I needed.

 

Vegas. All on black.