** Question about taxation **
Hey! Let's say I finished Flip and I currently have profits on the deal and I want to understand how these profits can be converted into expenses by the end of the tax year, so if I enter into a new flip deal and have overhaul expenses higher than the profits I made in the previous transaction, is it correct to say that a company actually did not make profits As of this tax year and I'm rolling out profits for next year? And if not, I would love to explain from someone who summarizes how the tax payment can be rolled out, thanks 🙂
I pay taxes to Israel so 1031 Exchange is not for me
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- Do not know exactly but it seems to me that's what you're looking for
The term 1031 Exchange is defined under section 1031 of the IRS Code. (1) To put it simply, this strategy allows an investor to "defer" paying capital gains taxes on an investment property when it is sold, as long another "like-kind property" is purchased with the profit earned by the sale of the first property.Mar 28, 2019
- Asher Touriel
- Add to the question you do not want to do 1031 Exchange
- It is possible in the US to postpone the tax liability (called the replacement of assets in the professional language), but in Israel they do not recognize this, and therefore will have to pay the full tax liability in Israel anyway. So, in total, what you want to do is not possible.
- Idan Assis
- Hi there Moshik, my name is Erez Shaham, CEO of virtue tax and tax consultant and licensed agent of the IRS with my qualification. And the reduction in profitability). The problem with what you describe is that the expense is associated with each asset separately in Flip mode (ie: cost of the property + renovation + expenses over the years) and is drained into the year of sale. You may not recognize these expenses until the sale as you do not recognize the income.
However, if you find general expenses at the LLC level, you can recognize these expenses already in that tax year and can offset against the income from the flip. Another significant point is the classification of income as ordinary income versus ordinary income. Of capital gain are especially preferable from the Israeli taxation perspective. It is very important to perform tax planning correctly in order to meet the criteria.
You can contact our office tomorrow and one of the delegates will be able to assist you.
- 1031 Not relevant here because you had to own the previous property for at least a year or two, whatever the profit on the sale should be channeled to buy another rental property and not Flip…
- There is a lot of information on the subject on our site - in Hebrew and English
- Can not do 1031 to clip