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AMT Passage/Blockage/Whatever!

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SteveO

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I have a property all ready to close that I have been trying to delay until the 1st of the year. The issue has been around AMT and what was going to be done, if anything, to spare the tax burden. It looks to me that another temporary fix has been put into place that may be better than the alternative that comes into play for the next year.

I may have shot myself in the foot though. It is not clear whether my deal can close before the end of the year now.

The main struggle for me is that I want to take out some or all of the profit from a deal. My accountant has stated that if I do that, there may be ramifications from the alternative minimum tax and a reduced ability to write off losses.

Fun stuff.:smx4:
 

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Diane Kennedy

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SteveO

Unless something just happened, the latest that I heard (yesterday) was that the House had a version and the Senate had a version that were close. They're supposed to come together on a plan today and then MAYBE the Pres signs it. He hasn't said if he will or not.

As I recall, you were doing a 1031 on the prop. Is that still the case?
 

Diane Kennedy

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I take it back! I took the day off, and look what happened.

The House and Senate HAVE passed the AMT temporary fix. The Pres says he will sign it.

There is no PAYGO provision - so no new taxes. (Interesting, is this going to be a new trend??)

I'll read the bill and post later today or tomorrow about it.
 

SteveO

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I am trying to figure out whether to exchange or not. If I can get away with paying long term gains and not be hit with AMT, I may take the money.

It seems that congress was crunched and nobody wanted to be the scapegoat in the upcoming elections, this may only be a temporary fix. No telling what political posturing will happen next year.
 

Diane Kennedy

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Steve - Maybe I'm overthinking this, but my two cents:

If you've already sold the property and it's in an exchange, continue on. By the time you file your return (you are extending, right?), you'll have a better idea what the law is going to look like in 2008. At that point, you can either finalize the exchange (you have up to 180 days to do the exchange) or you can drop it and take the gain in 2007.
 

SteveO

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I have held off the sale in an attempt to take it to a Jan 2nd close. It is still possible to close the sale this year. I do have everything in place for an exchange and plan on placing the proceeds in there just in case...

But, I am thinking it might be to my advantage to try and close before the end of the year. It takes away some of the gamble. I still don't know what my tax consequence will be if I take the 800K gain.
 

Diane Kennedy

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What if you take the sale before year end BUT treat it as an exchange. You can always not go through with the exchange.

I just hate saying do this or that when we're so close to the edge here. I still don't have a copy of the bill (Thompson's doesn't have it yet) as passed today and the Pres hasn't signed it still.

It seems like maximum flexibility is key - and that's why I'd do the sale now and keep options open with an exchange. Worst case you go into an exchange you don't want to and this year's AMT patch isn't as good as next year's plan will be.

Personally, I don't think anything permanently will happen with AMT until the election is done. So, I think 2008 will be a repeat of 2007, but that's just personal opinion.
 

SteveO

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If I go through with the sale this year, then I have one year less to play with the tax amount. If I go into a 1031 exchange, I will need to have all my decisions made before taxes are due or will need to put the potential tax money up in April.

If I move this out until next year, there is a question about how the taxes will be dealt with. Any changes will likely be after my exchange needs to be completed.

If the country leans toward the donkeys in November, I could face a higher tax bill.

You are right Diane. I need to understand what is in the bill.

I meant to paste this link in the original post: http://www.msnbc.msn.com/id/22327719/
 

SteveO

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I decided that this may be a good time to cash out on a deal as long as it closes by the end of the year. I rarely do this but I have a feeling that it may be more costly to do this in the future. The process only allowed for a small window to make this decision and I may be one of the fortunate ones that falls into that category. I like to be able to figure my decisions based on understanding of the process. Too bad our government makes this so difficult.

Next year may have a different flavor depending on where the elections begin to drift...
 

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