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Old 09-17-2019, 07:31 PM
Canuck_Prepper Canuck_Prepper is offline
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Default Selling Land and what to do with profit



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Hi guys. I'm hoping I can get some good counsel from people wiser then myself.

Situation. My wife and I live currently on an 103 acre homestead up in northern Ontario Canada. We are currently finishing up the process to sever the land into three parcels. Retaining just shy of 40 acres with the house. Planning on keeping 30 acres to hand over to my 6 year old son when he comes of age. We are planning on selective logging and then selling off the remaining parcel . We have been told by a realtor that we can expect between 60 and 70 thousand from the sale.

(We plan on selectively logging two of the parcels prior to divesting the proceeds of which we plan on using to pad our existing emergency fund and possibly invest in solar)

My questions are as follows:
1. Does anyone have any suggestions to minimize taxes on the proceeds? Are there write-offs (ie. severance costs) that I can write off as losses to counter the gains?

2. What would you guys do with the proceeds? We have no debt other then our mortgage (currently have 180 thousand left). We already make about 15 thousand in prepayments each year and have just over 10 thousand left per year in prepayment room. While I like the idea of investing (incl. building a nest egg for early retirement), I feel quite risk adverse going into a bear market / recession. I feel inclined towards maxing out the mortgage pre payments. Am I foolish?

3. Should I be concerned about selling the property prior to a recession or is raw land (not farm land) still a pretty stable asset class even during a recession?

Any suggestions and or criticisms would be appreciated.
----------------------------------
Further background:
Age- 35
Silver - 260 oz
Cash- 24k
Pension value - 380k
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Old 09-18-2019, 10:05 AM
country_boy country_boy is online now
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Quote:
Originally Posted by Canuck_Prepper View Post
Hi guys. I'm hoping I can get some good counsel from people wiser then myself.

Situation. My wife and I live currently on an 103 acre homestead up in northern Ontario Canada. We are currently finishing up the process to sever the land into three parcels. Retaining just shy of 40 acres with the house. Planning on keeping 30 acres to hand over to my 6 year old son when he comes of age. We are planning on selective logging and then selling off the remaining parcel . We have been told by a realtor that we can expect between 60 and 70 thousand from the sale.

(We plan on selectively logging two of the parcels prior to divesting the proceeds of which we plan on using to pad our existing emergency fund and possibly invest in solar)

My questions are as follows:
1. Does anyone have any suggestions to minimize taxes on the proceeds? Are there write-offs (ie. severance costs) that I can write off as losses to counter the gains?

2. What would you guys do with the proceeds? We have no debt other then our mortgage (currently have 180 thousand left). We already make about 15 thousand in prepayments each year and have just over 10 thousand left per year in prepayment room. While I like the idea of investing (incl. building a nest egg for early retirement), I feel quite risk adverse going into a bear market / recession. I feel inclined towards maxing out the mortgage pre payments. Am I foolish?

3. Should I be concerned about selling the property prior to a recession or is raw land (not farm land) still a pretty stable asset class even during a recession?

Any suggestions and or criticisms would be appreciated.
----------------------------------
Further background:
Age- 35
Silver - 260 oz
Cash- 24k
Pension value - 380k
I donít know many people on here can give you CA tax advice- in the US, you could spend the gains on repairing roads or installing fire lines, and reduce your tax liability- you may be able to spread the income offer multiple years if it would put you in the next tax bracket, or cost you some credit on your taxes.

With the stock market at record highs, and 10 years into a bull market, I wouldnít move a huge sum into the market. Interests rates are low, and dividend stocks, have soared. Paying off a mortgage sounds like a good investment.

Around here, timberland is a big investment- and the timber and land are priced separately for appraisals- my experience is timber stands vary widely due to fluctuating demand for construction lumber and to a lesser degree paper and hardwood. The timber land itself seems to almost ignore the current economic situation given a 25-30 year time frame.

SYP stands that have a good utility pole yield donít fluctuate except after major hurricanes, when the price will briefly increase as log stocks need to be replenished. Typical SYP which will be cut for pulp ( kraft paper), chip&saw (half paper, half small dim lumber) and sawtimber goes all over the place, considering the producerís costs are fairly fixed- the land owner only gets whatís left.

I canít speak to the CA market,
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Old 09-18-2019, 01:54 PM
rriley rriley is offline
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You should consult a tax preparer familiar with Canadian taxes.

From what I see in your post, you will have sale proceeds of some $60 to $70k. Your tax amount would be your personal percentage on the net sale proceeds less the cost of the real estate commissions and expenses and less the basis in the property. I see that Canadian federal tax rates are around 20% to 62% on income up to $147,000 and that there are also provincial and territorial taxes of around 15%-18%. Given the high tax rates you would do well to speak to a tax preparer to identify any further deductions that would apply to your real estate sale and perhaps even reconsider whether it makes sense to sell the property since you have cash and retirement funds.

Anyhow, go talk to a Canadian tax preparer before you sell the property.
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Old 09-18-2019, 02:44 PM
Glockpride Glockpride is offline
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Better make sure your mortgage lender will allow the sectioning off as it reduces the value of their holdings that you owe on.
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Old 09-18-2019, 06:46 PM
PalmettoTree PalmettoTree is offline
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I am divide it into roughly thirds and invest in WMB, ENB, & EPD. All pay an annual dividend over 6%.
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Old 09-19-2019, 12:58 PM
txprep txprep is offline
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Quote:
Originally Posted by Canuck_Prepper View Post
Hi guys. I'm hoping I can get some good counsel from people wiser then myself.

Situation. My wife and I live currently on an 103 acre homestead up in northern Ontario Canada. We are currently finishing up the process to sever the land into three parcels. Retaining just shy of 40 acres with the house. Planning on keeping 30 acres to hand over to my 6 year old son when he comes of age. We are planning on selective logging and then selling off the remaining parcel . We have been told by a realtor that we can expect between 60 and 70 thousand from the sale.

(We plan on selectively logging two of the parcels prior to divesting the proceeds of which we plan on using to pad our existing emergency fund and possibly invest in solar)

My questions are as follows:
1. Does anyone have any suggestions to minimize taxes on the proceeds? Are there write-offs (ie. severance costs) that I can write off as losses to counter the gains?

2. What would you guys do with the proceeds? We have no debt other then our mortgage (currently have 180 thousand left). We already make about 15 thousand in prepayments each year and have just over 10 thousand left per year in prepayment room. While I like the idea of investing (incl. building a nest egg for early retirement), I feel quite risk adverse going into a bear market / recession. I feel inclined towards maxing out the mortgage pre payments. Am I foolish?

3. Should I be concerned about selling the property prior to a recession or is raw land (not farm land) still a pretty stable asset class even during a recession?

Any suggestions and or criticisms would be appreciated.
----------------------------------
Further background:
Age- 35
Silver - 260 oz
Cash- 24k
Pension value - 380k
In the US you would put the property into an LLC or corporation. When you sold you would get a capital gain, but you would offset the gain by other expenditures in the LLC which would hold the rest of the property.

In an ideal world you would have accumulated losses over the last 5 years that you could carry forward and apply against the proceeds.

Typically capital improvements cannot be expensed all at once and have to be amortized over time. So if you bought solar panels you might be able to make them tax deductible, but not all in one year (I believe it is 5 years for solar equipment). In 2010 to stimulate the economy, the govt allowed a 100% tax deduction.
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