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The maximum tax rate on net capital gains (i.e., the excess of net long-term
capital gains over short-term capital losses) has been reduced from 28% to
20%. The new rates apply to net gains after July 28, 1997, on property
held more than 12 months. Additionally any gain falling into the 15% rate
will be taxed at 10%.
The maximum tax rate continues to fall to 18% for net gains on property held
for five years. This applies only to assets whose holding period begins
after December 31, 2000. Additionally the 10% tax rate will fall to 8% after
December 31, 20001, for net capital gains on property held more than five
years.
Any part of a gain on the sale or exchange of such depreciable real property
that represents prior depreciation is "recaptured" and taxed at a
maximum rate of 25%.
These rates do not apply to net capital gains on the sale of
collectibles. The maximum rate on these gains will remain 28%.
Your total tax exposure may be increased by an additional state tax. Even
while doing an exchange, some states may levy tax. Check with your tax
and legal counsel for your states treatment of Section 1031 Tax Deferred
Exchanges.
Equity Advantage, an an investment based exchange facilitator has always
promoted the successful investment team. The various rates holding
periods mentioned above can only further emphasize the need for competent tax
and legal counsel.
The 1031 process can be very complex, so we encourage a call to Equity
Advantage early to discuss any potential challenges in the transaction.
The best time to call us is the beginning pf the transaction -- not when ready
to open or close escrow. Early contact allows us to help iron out
potential problems or concerns. We're here to help!
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