2A — September 28 - October 11, 2012 — Mid Atlantic Real Estate Journal
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ABC Delaware/ABC Pennsylvania............................... 27A Aldo Design Group ........................................................ 10A Alfred’s Auctions, Inc. ..................................................... 7A Bennett Williams Realty Inc. ....................................... 35A Brahney Paving............................................................. 18A Capitol Aerials............................................................... 21A Cooper Roofing Inc. ....................................................... 11A Crystal Window & Door Systems, LTD........................ 24A Earth Engineering Incorporated .................................. 30A Expert Publishers, Inc. ................................................... 5A Fowler ............................................................................ 28A Franchise World ............................................................ 33A GA Keen Realty Advisors................................................ 2A Gilbeaux Associates, P.C. .............................................. 21A Haftek CWS................................................................... 14A High Associates LTD. ...................................................... 3A Hutchinson .................................................................... 21A IREM.............................................................................. 17A Landcore Engineering Consultants, P.C. ..................... 32A M. Miller & Son ............................................................... 3A Marcus Millichap Taylor Zang...................................... 31A NAI Mertz........................................................................ 4A NJ Paving ...................................................................... 12A Penntex .......................................................................... 22A Poskanzer Skott Architects........................................... 13A ProExpos.......................................................................... 1A RBS Citizens................................................................BC-A RCx Building Diagnostics ............................................. 20A RD Management LLC .............................................. 36-37A Regal Bank .................................................................IFC-A Remco Realty Group LLC ............................................. 30A ROCK Commercial Real Estate..............................8A, 32A Shah Electric & Builder, Inc......................................... 12A The Sheward Partnership............................................. 23A Thesing Companies ....................................................... 15A University Place Associates .......................................... 23A Urban Ecoforms............................................................. 22A Vanguard Realty Group .................................................. 4A Vantage ...................................................................10A,14A Warner Realtors .............................................................. 7A Whitesell ........................................................................ 10A MAREJ A DVERTISERS D IRECTORY
Mid Atlantic R EAL E STATE J OURNAL Publisher ............................................................................Linda Christman Co-Publisher .........................................................................Joe Christman Section Publisher ..............................................................Michael Campisi Section Publisher ................................................................Elaine Fanning Section Publisher ............................................................... Kevin MacLean Senior Editor/Graphic Artist ................................................ Karen Vachon Graphic Artist/Social Media Specialist ............................ Rachel Rugman Office Manager ...................................................................Joanne Gavaza Editorial Consultant ............................................................. Ben Summers Contributing Columnist .......................................... Jonathan Christianson Mid Atlantic R EAL E STATE J OURNAL ~ Published Semi-Monthly P.O. Box 26 Accord, MA 02018 (Mail) 312 Market Street, Rockland, MA 02370 (Overnight) Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, P.O. Box 26, Accord, MA 02018 USPS #22-358 | Vol. 24 Issue 18 Subscription rates: $99 - one year, $198 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Toll-Free: (800) 584-1062 | MA: (781) 871-5298 | Fax: (781) 871-5299 www.marejournal.com
Mid Atlantic Real Estate Journal
By Jonathan Christianson When to Pay the Piper (and how much will he charge)?
A
tax deferred exchange permits investors to defer tax on capital
gains indefinitely. To some ex- tent, the benefit of tax-deferral depends on tax rates that apply in the future when there is a taxable disposition of the in- vestment property. Obviously, if tax rates increase significantly, one might benefit from paying taxes today at lower rates. The federal tax rate on long- term capital gains for most taxpayers is currently fifteen percent (15%). If Congress fails to extend that rate, then the tax rate on long-term capital gains will increase to twenty percent (20%) in 2013. In addi- tion, the national health care reform legislation that became law in March, 2010, imposes a new 3.8% tax on certain invest- ment income beginning in 2013. Thus, for some higher income taxpayers, the effective rate on long-term capital gains will increase to 23.8% (not including State taxes). Given the inability
The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
of Democrats and Republicans in Congress to agree on almost any significant legislation in recent years, it is anybody’s guess what rates will be next year. Accordingly, some tax- payers and their advisors have determined that they should recognize capital gains in 2012, where possible, to lock in the current low capital gains rate. Where tax-deferral is otherwise possible, a decision to pay tax now constitutes a simple wager that capital gains rates will increase in the future. One might reasonably make
that bet and take the risk that Congress will extend the cur- rent rate and eliminate the Medicare tax on gains, but is that actually necessary? For some taxpayers, there is a better solution. What if you could sell investment property in 2012 and, in 2013 choose whether to: (i) pay the capital gains tax in 2013 at the 2012 rate, (ii) pay the tax in 2013 (if the favorable rate remains in 2013), or (iii) defer the tax indefinitely with a tax-deferred exchange under continued on page 41A
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