Nothing in real estate is a guarantee. Experts are constantly trying to get ahead of the curve, bubble and trends. However, as a seller of real estate, it’s possible to reduce your uncertainties to a minimum, and to be sure that your sale will have the desired effect on your business, your personal finances, and your tax situation. A Gain on Sale Analysis can help provide those answers.

Mitigate Real Estate Surprises

Usually, if you sell a piece of property, the transaction will have an impact on your tax situation. Analyzing the potential gain on a property can tell you the expected after-tax profitability of a transaction and mitigate any surprises.

Unfortunately, we’ve had to break the news of a surprise to a client who made a hasty sale without proper investigation. The gain on sale was greater than expected, and the client paid significantly more tax as a result. Had they been aware of the tax impact, the client may not have gone through with the transaction, or may have attempted to structure the transaction differently. gain-on-sale-analysisGain-on-Real-Estate-Analysis

Complex Situations

Properties that have a more complex history are especially important to analyze.For example, if your property was previously acquired in a deferred tax exchange, was previously contributed into a partnership or corporation, or has received the benefit of accelerated depreciation under the bonus rules or by making use of a cost segregation study, your basis in the property may be lower than expected, resulting in a higher than expected taxable gain.

(Related post: Real Estate in IRAs)

Also, in many cases, an alternative to a standard sale may be available. Installment sales, deferred tax exchanges (1031 exchange), option agreements, and sale-leaseback transactions could all be potential alternatives to a standard sales transaction, and may result in a better overall tax impact to you. These transactions can be more complex, but if you understand the impact of a standard sale, you may decide it is worth it to analyze your options.

You Need a Real Estate Expert

If you need a Gain on Sale Analysis, you probably need it sooner rather than later in order to make a decision about selling the property. We have the system and experienced staff in place to facilitate a quick turn-around. Once we get the needed documentation, we will work with you so you feel comfortable moving forward with your real estate transaction and are aware of all the options available to you.

Visit our website services page to learn more about the process and contact us if you need a Gain on Sale Analysis done for your transaction.

Gain-on-Real-Estate-Sale-AnalysisBy David Olson, CPA
Manager at WHH