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Capital Gains Blues

By
Real Estate Agent with RE/MAX Prime Properties

I recently got first-hand experience with the dreadful capital gains tax blues.  I owned a second business for ten years and recently sold it in order to spend more time in real estate.  I had heard of capital gains taxes, but I had never understood how painful it could be.  When we filed our taxes this year, Uncle Sam made sure he got a big bite out of our profit.  I still have difficulty understanding the concept of these taxes.  I worked hard to build my business over the course of the ten years we were open.  In the beginning I saw little to no profit and even found myself dipping into my own pocket to keep the business running.  Once we were established, I still felt that the time and effort I put into my business was not reaping the kind of rewards I had hoped.  However, I felt that once I was able to sell I would finally see the hard work pay off.  Now don't get me wrong, I'm not complaining about the money we made.  However, it seems that I got a double whammy on my taxes.  I had to pay somewhere in the neighborhood of about 20% (give or take) and then the rest was added to my income and then I had to pay more income tax.  This was a frustrating situation for me, but I feel as though it has helped me in my current business.  Hopefully, I will be more understanding of my clients who are investors and I will be able to relate to how they feel.  I would also like to lean more about these tax laws in order to help my clients who find themselves in the same situation.  If anyone can share your knowledge in this area, I am all ears!

Comments(4)

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Tony Fantis
Fantis Group Real Estate - Salt Lake City, UT
Realtor,Principal Broker - Salt Lake City
Sounds like it's time for an expensive CPA to help you save you and your clients a LOT of money.  I've gotta say, i do my homework, but when it comes to taxes and strategies nobody knows better than my expensive CPA (who saved me an extra $6,000 or so last year.)  Her bill was less than $800.
Apr 04, 2008 04:52 PM
Carol Williams
Although I'm retired, I enjoy sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Author, Golfer, Traveler, Retired, Wenatchee, WA
I agree.  A good accountant is worth FAR more than they charge.
Apr 04, 2008 05:09 PM
Trey Thurmond
BCR Realtors - College Station, TX
College Station , Texas Homes

Hey Laura,

Without trying to  sound political, the Democrats in Congress are planning on letting the currently "low" capital gains tax rate expire in 2 years when I believe it is scheduled to expire.  Wait til you see what they want it to go to....you will choke! It will hurt investment motivation, and ultimately effect our profession in terms of sales volume.    :o(

Apr 09, 2008 06:47 AM
Carol Williams
Although I'm retired, I enjoy sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Author, Golfer, Traveler, Retired, Wenatchee, WA
Trey,  That's why we agents need to be pro-active about our RPAC activity and not "let" bad things happen.  It's already obvious how vital real estate activity is to the overall economy.
Apr 09, 2008 06:51 AM