if i make a profit of 100k for a sale of a house how much taxes do i pay and when and is there a way to avoid?

Question

paying taxes if i open a coorporation in nevada and i'm doing my investments in california?

Answer 1

You cannot LEGALLY open a Nevada corporation to avoid paying tax on money that was earned in CA.

If it was your personal residence AND you lived there for at least 2 years. the profit is tax free.

If it was a rental property, you can do a 1031 Exchange and defer paying taxes, but you need to know the rules. Talk to a CPA or Attorney.

If you sell rental property and want the cash, the escrow company MUST withhold part of the sales price for California state income tax. I think that it is 3.33%, AND you will owe federal income tax on the profit too.

Federal income tax will depend on whether you owned the property for more than one year or less. (long term OR short term capital gains)

Answer 2

If the home was owned by a corporation then the gain is fully taxable to the corp. There is no way to avoid the tax.

If this was your principal residence and you owned it and lived in it for at least 2 full years of the 5 years immediately prior to the sale you may be able to exclude some or all of the gain from tax. You can exclude up to $250,000 if your filing status is Single and up to $500,000 if your filing status is Married Filing Jointly.

If this was an investment property that you converted from personal to investment or vice versa then you MAY still be eligible to claim the exclusion if you meet the 2 of 5 rule BUT any depreciation allowed or allowable while it was held for investment must be recaptured and the recaptured amount is fully taxable regardless of the exclusion eligibility.

Tax is never withheld at closing on the sale of investment property, contrary to what another poster stated, at least not for Federal taxes. State taxes could be another story though I've never heard of that in any state that I've done business in.

Answer 3

Bostonian's answer is right on target, EXCEPT that CA does withhold 3.33% of gross sale price ( or 9.3% of net gain if you so elect). There are exceptions for Sec 121 exclusion & 1031 exchanges.

Now, let me disabuse you of the idea of NV corp as a way around CA tax. First, income is taxed based on the residency of the taxpayer (NV in this case which has no state income tax) and where the income is generated. If most of your business is done in CA, you will pay tax to CA on that income so you have gained little, if anything. Add to that the privelege and expense of registering with CA's Secretary of State. Finally, as I often see with people who try this tax dodge, you'll need a presence in NV, usually a P.O. Box. So now you get to pay late penalties on any bills that went thre that did not get forwarded to your real address on a timely basis.

The bottom line: keep it simple. Or, better still, consult a tax professional BEFORE you do anything.

Answer 4

you need to speak to an attorney. any advice you might get on yahoo!answers is of dubious validity at best. and if you get legal advice that turns out to be wrong, you have no recourse against the giver.