Avoiding Taxes on a Sale?
Mitch is selling a mobile home park, but what will happen with taxes?
ANSWER: You can do a 1031, tax-deferred exchange if you put the money back into real estate. IF you do this, you put the money into an escrow account and have 45 days to identify real estate you plan to buy and 180 days to close on it. And you can split that money up as much as you want – go buy nine $50,000 properties or one $1 million property. Either way, you’ll avoid the taxes.
If you don’t put the money back into real estate, you’ll get hit with the taxes. You can’t go real estate to business, real estate to mutual funds, or any other type of investment.
In some cases, if you’re trying to grow a business, it’s worth it to take the tax hit. You just have to decide if it’s worth it to you to pay the taxes to get your money freed up from real estate.