How much capital gains would I pay in this situation?

teddythebear's picture
Rank: Neanderthal | 2,079

I know I would need to speak to an accountant specializing in this, but felt I might get help from some experience property tax accountant here.

We built a commercial property in 2004 for $4.5 million. We then bought out the partner by refinancing the property and buying him out at a $5.2 million valuation. We paid $1.2 million for his stake. We now have an offer for $5.9 million. My question is that what are the cap gains profits? Is it simply on the $700k profit since the buyout? Is there a way for us to limit the tax on the $700k?

Comments (5)

Aug 14, 2017

I'm not an accountant but pretty sure your basis gets blended here if you retained original cost basis on partial interest of the project. You can calculate using straight forward math on membership unit basis. As far as limiting tax bill, this would be pretty situational and dependent on goals and cash needs. I.e structured sales, holding notes, 1031 etc.

Aug 14, 2017

Yes the 1031 route is optimal, but we would much rather pay some tax and have the ability to locate a strong deal rather than forcing ourselves into an okay deal just to save on taxes.

Best Response
Aug 14, 2017

Taxes suck, don't they? What about negotiating a long close with ability to initiate closing with notice? I've done it in the past to buy time identifying. I.e. 12 months with ability to initiate 45 day close. Not likely, but worth a shot if buyer will stick around.

    • 2
Aug 14, 2017

this is right..and also not UNcommon +1 SB

Aug 15, 2017