1. How is capital gain tax calculated?
Capital gain tax on property held for more than 365 days is computed at a flat rate of 15% and is due and payable in full on the next tax reporting year following the sale (commonly April 15th for most individuals). Gain is defined by taking the net closing proceeds and subtracting the “basis” of the property consisting of the actual purchase price together with closing costs and capital improvements, which enhanced or extended the life of the property. Real property taxes and general maintenance are not taken into consideration when establishing basis.

2. What is a deferred exchange?
Section 1031 of the Internal Revenue Code defines a deferred exchange as one when which a taxpayer transfers property held for productive use in business or for investment and later receives property to be held for similar purposes. The key is intent. Accordingly, if a party owns a vacant lot and the intent was for investment purposes and later replaces this property with a condominium or house with the primary intent of rental or investment purposes the properties are deemed to be like kind.