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Author: rensimer Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19224  
Subject: Real Estate LP Cap Gain Rate? Date: 5/2/2000 3:16 PM
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Back in 1983, when top marginal tax rates were still 50%, I purchased some units of real estate limited partnership that dealt in low income housing. Although this wasn't supposed to generate a lot of income, it was supposed to generate tax losses which could at that time be used to offset against regular income, and hence, result in tax savings. Later the properties were to be sold off and the LP terminated in 10+/- years.
Within a couple years, the laws were changed without grandfathering, and income, gains and losses from activities such as these were classified as "passive" and could no longer be used to offset current income. With the change in the law, there were no longer any
tax savings, only accumulated "passive losses." Furthermore, the changes in the law virtually precluded the sale of these properties because of their excessive regulation. Now, 17 years later, I still have units of this unendable LP. It has long ago ceased providing any financial benefits. It's marketability is extremely limited even though it's value is practically zero. My basis in this LP is negative, and despite the accumulated passive losses, even if I sold it for $0, I would still owe capital gains tax on the sale. After this long preamble, my question is simply, "If I sell this real estate LP, is the long term capital gain rate that would apply to this sale 20% or the 25% rate?" I posted this question originally on the Tax Strategies Board (Post 35283) but I didn't know if Pixey hangs out there too! Thanx.
WTR
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