You never know, unless you ask.
I have a client with an airplane ($1.2M) who would like to potentially trade/exchange it for a San Francisco property.
Given the price, you might contact the sellers of 2016 Pacific #203. Who knows, maybe they’re selling to get out of dodge, and this Adam Aircraft A500 would certainly expedite that process.
Interested parties should contact the agent of the client.
Would parachutes be included in that price? How about air sickness bags? Surfboards fit below? Just curious.
4 thoughts on “I’ll give you MY airplane in exchange for YOUR house”
Investors who own multiple properties, engage in a lot of flipping or operate from a business office may find that, come tax time, they are designated as “dealers.” What does this status mean? While investors’ profits can be taxed at the lower capital gains rate if the investor has owned the property for more than one year, dealers’ profits, on the other hand, are taxed as ordinary income, which can be much higher.
Internal Revenue Code § 1221 defines a capital asset as “property held by the taxpayer (whether or not connected with his trade or business),” but does not include “property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business.” This means that real property held “primarily” to be sold—rather than as an investment—is not taxed as capital gain, at a maximum of 15 percent, but rather as ordinary income, with rates up to 39.6 percent.
Investors wishing to avoid higher real estate taxes can try to structure their real property sales to avoid being labeled as a dealer. Dealers hold property primarily for sale purposes, while investors “[t]rade for profit-motivated reasons such as long-term appreciation, dividends and interest,” according to the IRS.
Real estate dealer rules can get a bit murky. In fact, “[t]he problem is so severe that, according to the Fifth Circuit Court of Appeals, ‘if a client asks you in any but an extreme case whether, in your opinion, his sale will result in capital gain, your answer should probably be, ‘I don’t know and no one else in town can tell you’’ (J.D. Byram, CA-5, 83-1 USTC para. 9381, 705 F. 2d 1418),” according to The CPA Journal.
The key factors the IRS looks at when determining whether someone is an investor or a dealer are holding time and number of sales. The capital gains tax rate only applies to property that has been held for longer than one year, and the longer the property has been held, the better the chances of qualifying as an investor, according to The RECon News. On the other hand, a large number of properties held for short periods of time before being sold are more likely to earn the seller dealer status.
Holding time and number of sales determine a dealer versus an investor to the IRSOther elements that may influence one’s status include the level of engagement with the sale, the number and nature of improvements made to the property and whether or not the seller maintains a business office.
Dealers tend to have a higher level of personal engagement in the transaction process than investors, so those trying to maintain investor status may want to hire a broker to handle their sales.
Investors should also avoid making excessive improvements to the property. Particularly to be avoided are developments such as “subdividing, grading, rezoning, or installing road and utilities,” while improvements that do not exceptionally increase the property’s value or that are necessary for the property to be sold at market value should be acceptable, according to a Berger Kahn publication. “The presence of development and improvement activity coupled with frequent sales almost always results in ordinary income treatment,” according to Berger Kahn.
As for business offices and agreements, The RECon News recommends that investors “[p]ay attention to word choice in partnership agreements and in naming partnerships, opting for words like ‘investment’ as opposed to ‘development.’”
Since it is possible for a dealer to also hold personal investment property, the fact that one or more of an investor’s properties fall under “dealer” classification does not necessarily mean that all properties will. However, having other dealer properties “does make it more difficult for the taxpayer to prove that the sale should be taxed as a capital gain,” according to The RECon News. The investor will be called upon to prove that the investment property is separate from dealer properties
“If you own different lots, you should separate the ownership of these lots into different business entities, documenting the time spent on each,” according to The RECon News.
But there are also some advantages for those who are dubbed dealers when tax season rolls around. Losses on dealers’ properties are not limited like capital losses, but are instead treated as ordinary losses, according to Moss Adams LLP’s Real Facts. And “interest expense on dealer-held property can generally be deducted from ordinary income and is not subject to investment interest limitations,” according to Real Facts.
Since the rules surrounding dealer and investor status are complex and often confusing, investors should seek out a professional for advice on how to take steps to achieve or avoid a certain status. The status one is assigned depends heavily upon the specific situation, so a professional tax advisor is the best resource to analyze the facts and help investors create a workable plan.
You could have just posted a link to said article?
[Editor’s note: You all must be reading the same blogs. That’s good to see. Thanks for tipping us off to a great one we hadn’t seen. I’ll try to throw this on the main page. TFS is all about giving credit where credit is due.]
No need to give credit where credit is due. Plagarism is the best…until you get caught.
i dont understand the above article????
but I have a question. How do you trade such items? Does X sell to Y the plane, and Y sells the condo to X – exept that none signs the check?
how and who will pay the cost of closing and other amounts that are supposed to be “change money” on the main price?
anyway. good luck to your client: as our agents repeated endlessly, everything changes hands – it’s only a matter of time and appropriate pricing.