Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 2
The gain is going to be ~300k, the loss carry forward is ~ 50k.

If her strategy had been OK it would have been a nice way to get 50k of untaxed, spendable money.


Go back and read my post again. Based on your numbers above, my guess was correct in the second half of the post.

The 50k wouldn't exactly be untaxed. But the taxable gain would be roughly offset by the loss carryforwards, resulting in no additional tax now. I actually think it is not an entirely bad strategy. It depends on what you want to accomplish.

Remember that this will not make the whole exchange taxable, just the boot portion will be taxable. And you will be able to recognize your deferred passive losses to the extent that you have taxable income from this transaction. So that income will be sheltered by your loss carry forwards.

And, we haven't even begun to bring up the concept of recapture...

Actually, we did - kind of. The gain that would be recognized if you received some boot in the exchange would first be recapture. That tax rate will be capped at 25% - still potentially less than your ordinary tax rate.

I'm not sure you understand the idea yet. I'd highly recommend sitting down with your tax advisor and going over this in some detail with her. It still might not be right for what you want to accomplish, but I suspect it might be a better idea than you think it is. Once you've got a good handle on the consequences of receiving some boot, then you'll be in a better position to decide if that is really what you want to do.

--Peter
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.