CG to OI?

[JG EA]

I love it when people look ahead and warn you of things. Well, Kiplinger thinks tax reform in 2013 may convert Capital Gains into ordinary income. Besides the possibly selling before that time, it had some advice about thinking twice before selling under an installment sale. Something I was thinking of doing.

[jimmcg]

I love it when people look ahead and warn you of things. Well, Kiplinger thinks tax reform in 2013 may convert Capital Gains into ordinary income. Besides the possibly selling before that time, it had some advice about thinking twice before selling under an installment sale. Something I was thinking of doing.

Always a risk (and anyone's best guess) as to possible tax law changes. As professionals we keep informed of possible tax law changes and are always evaluationg the ongoing risk. Sometimes we get the bear and sometimes the bear gets us. Such is life.

[Edsel]

Not the First Time

I have survived three of these attempts to "end" capital gains treatment. The cycle is actually very predictable, and occurs as follows:
1) Govt bureaucrats mathematically calculate how much money they're losing because wealthy people who sell property are not being taxed at the full rate of ordinary income. Capital gains rates are then ended by "soak the rich" tax legislation. Government begins to salivate and enjoys delusionary visions of the money this is going to bring in.
2) Real Estate dies on the vine. Those who want to sell their property hold onto it because they don't want to pay the tax. Or, alternatively, in order to pay the tax, they raise the selling price enough to accommodate it. Either way, movement of real estate suffers and slows to a crawl.
3) Real Estate becoming stagnant slows the construction industry. No property to build on, and nothing to build. "Soaking the rich" only means carpenters, concrete pourers, electricians, building tradesmen go without jobs, and even white collar people such as real estate brokers and architects start hurting.
4) In a desperate attempt to raise revenue, curb unemployment and jump-start the economy, government again establishes preferable rates for capital gains.

[JG EA]

Yes, thanks for the replies. If we sell now - and that's a very big if - then that possibility of a higher tax in 2013 is there. But if we sell now it may only be because of an installment sale. People who can buy outright are looking for very good deals only. The only offers have been at half our listed price which I already thought was way too low.

It is true that even if the government changes CG's to ordinary income, they could change back also.