In most cases, when property is sold, the government takes a part of that income as tax. There are some situations in which sellers of property are exempt from this tax, usually in cases where a family member is acquiring the property. It is well worth the effort for individuals with property to become familiar with these exceptions; not knowing about them could cost your children or other relatives many thousands of dollars in taxes that don't need to be paid.
Gifts to Children
The government allows people to give up to $13,000 annually to their children without paying taxes on it. For wealthy people, planning ahead and beginning to do this long before they die can mean a substantial amount of money going to their children rather than to the government. The trick, of course, is to retain enough money that you can live comfortably, but not so much that there is a huge pile of cash on hand when you die. Making this equation effectively requires knowing when you're going to die, which is a tricky for most people.
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If your family farm is incorporated, you are allowed to transfer stocks in the farm to your children without paying tax on them. This is something to keep in mind for farm owners who have children who are interested in continuing the farm. It is not something to be undertaken at the last moment. Incorporation of the farm can provide other tax and financial benefits as well. There is a $500,000 lifetime capital gains exemption that applies to farm property. Particularly for small farms, this can result in a substantial tax reduction.
The 1031 exchange allows an investor to trade real estate held for investment for other investment real estate and incur no immediate tax liabilities. If you are in possession of an investment property that you are seeking to transfer while avoiding the resulting taxes, this is trickier than domestic property. Unlike a primary home, the capital gains on an investment property can't be spread out over several years of tax returns in order to minimize the tax bite, but must be paid in the year that the gain is made. Section 1031 of the tax code enables the owner of an investment property to exchange it for another property without paying capital gains tax. If the purpose of your property sale is in order to buy another property, you may be able to use this to save money.