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As a retired CPA and current Realtor, I always keep an eye out for changes in tax laws that may benefit my clients or help them avoid pain.

If you are considering selling some real property, but cringe at having to share your profit with the Federal Government, here's an opportunity
to AVOID Capital Gains Tax on those profits.

This is a Quirk in the tax law enacted in 2003 that has an exemption on Capital Gains Tax, but only for the year 2008.

Obviously, this provision was inserted for the benefit of some group of wealthy individuals, and most likely was instigated by a paid lobbyist on
K-Street. As you may know, most laws are NOT written by our Congressmen, but by lobbyist for special interests.

Here is an excerpt from;

Jobs & Growth Tax Relief Reconciliation Act of [ 2003 ]

Sec. 301 Reduction in capital gains rates for individuals; repeal of 5-year holding period requirement.

The Act reduces the current 20- and 10-percent rates on the adjusted net capital gain to 15 and 5 percent, respectively, effective in taxable years
ending on or after May 6, 2003, and beginning before January 1, 2009. For taxable years beginning in 2008 only, the 10-percent rate is reduced to zero.
These lower rates apply to both the regular tax and the alternative minimum tax. For taxable years that include May 6, 2003, the lower rates apply to
amounts properly taken into account for the portion of the year on or after that date. This generally has the effect of applying the lower rates to capital
assets sold or exchanged (and installment payments received) on or after May 6, 2003.

The zero percent rate applies for individuals in the 10% or 15% income tax brackets.

If you are in a higher tax bracket, consider the following.

The zero percent rate will provide a special opportunity where tax can be avoided by shifting long-term capital gains by making gifts to children over age 13.

Take advantage of the UGMA portion of the law and gift the property to your children prior to liquidating the real estate.

That way they can reap the Zero Capital Gains provision.

You must consider the Gift Tax limitations and provisions, but this is a topic worth exploring with your tax advisor.

Disclaimer: The information in this article is for general knowledge and is not to be considered tax advise or counsel.
Please consult your tax advisor before taking any actions based upon this article.

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