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Posted: 1/7/2006 9:58:58 PM EDT
I have all of my money tied up in real estate right now. It's been very good to me thusfar, but i'm looking to diversify a bit due to some market shifts I see someing in the areas i'm invested in.

Does anyone know if treasury products would qualify as an income deferral from the proceeds from real estate sales?

Does anyone have any opinions on the pros and cons of Treasury instruments?
Bonds, Bills or Notes?
Link Posted: 1/7/2006 10:28:44 PM EDT
Treasuries, CD's, are a total waste. After allowing for inflation, and taxes on the dismall return, the government is the only winner.
Link Posted: 1/7/2006 10:28:56 PM EDT
You can only defer gains on real estate if you do a 1031 exchange, and only if it's not personal use (such as your own home) and you must exchange into more real estate. Getting anything else beside more land/buildings constitutes "boot" and is thus taxable.

As far as buying t-bills, bonds or notes, would you really loan money to your uncle that already owes $8 TRILLION to other people and overspends by $400 BILLION each year? I wouldn't, but your results may vary.

Link Posted: 1/7/2006 10:35:31 PM EDT
[Last Edit: 1/7/2006 10:44:51 PM EDT by U_Down_Wit_OPP]
Gotcha.

Any suggestions as to where this cash can be rolled into that looks to be a future winner?

Regarding the 1031, what do you mean "personal use"...

Say I own some building lots in a state far away that have appreciated and I want to roll the proceeds from the sale into another area that I’m confident has potential.
Does that qualify for a 1031 rollover?
Link Posted: 1/8/2006 8:20:34 PM EDT
Personal use means not used for business or investment purposes. Rental real estate qualifies, as does property used in your business. Land held for appreciation also qualifies. Your home, second home, vacation home, etc. do not.

If you have raw land somewhere and want to sell, you can defer the gain on the sale if you roll over the proceeds into a qualified new investment (sell raw land in one state, buy more land in another). You can not roll over gains from investment property into a new house that you plan to live in, because then it wouldn't be a "like kind" exchange.

The title company that handles the closing can put you in touch with companies that facilitate these exchanges - their fees will range from $300-1000. The IRS has very strict rules about how the exchange needs to be done, so talk to your accountant before deciding to sell to make sure you understand all the rules.
Link Posted: 1/9/2006 10:17:01 AM EDT

Originally Posted By tax_monster:
You can only defer gains on real estate if you do a 1031 exchange, and only if it's not personal use (such as your own home) and you must exchange into more real estate. Getting anything else beside more land/buildings constitutes "boot" and is thus taxable.

As far as buying t-bills, bonds or notes, would you really loan money to your uncle that already owes $8 TRILLION to other people and overspends by $400 BILLION each year? I wouldn't, but your results may vary.




"Risk-free rate" is still based on U.S. treasuries last time I checked. You sound like you know your stuff. Fact is U.S. governments are still the safest (preservation of capital), least volatile securities one can own. Please don't be misleading.
Link Posted: 1/9/2006 8:30:00 PM EDT

Originally Posted By James16688:
"Risk-free rate" is still based on U.S. treasuries last time I checked. You sound like you know your stuff. Fact is U.S. governments are still the safest (preservation of capital), least volatile securities one can own. Please don't be misleading.




In the land of the blind, the one eyed man is king.

I'm not being misleading. US Treasuries are only worth what people think they're worth. The .gov must, can, and WILL either a) default outright, or b) inflate the debt away giving you 2 cents on the dollar in purchasing power.

1 year treasuries? Sure, why not. 10, 20, 30 year bonds? ha ha ha ha ha ha ha.

Link Posted: 1/10/2006 3:42:08 AM EDT
[Last Edit: 1/10/2006 10:06:26 AM EDT by James16688]
Most stores of value derive their value from "what people think they're worth." I agree with you on that. (sidenote: Gold may have the most closely matched market value to intrinsic value?)

But I must respectfully disagree with the rest of your post:.

A. .gov will not default outright in our lifetime, default means the government has gone bankrupt. as long as there are taxes, i doubt that will happen.
B. your economics is flawed. the dynamics of U.S. inflation, interest rate and Treasuries make it highly unlikely inflation "giving you 2 cents on the dollar." -about as likely as the U.S. goverment going bankrupt. all financial institutions base their interest rates off Treasuries or it's derivatives, they would all go under before the goverment does. also, with regards to inflation and government bonds EDIT: given point A., i'm not sure how you might explain away TIPS or I-bonds.

i'll stop here. you can have the last word.
Link Posted: 1/10/2006 12:20:05 PM EDT
I'm going to agree with your point A - I think it unlikely that any politician would commit political suicide by an outright default. Things would have to get pretty bad for that to happen.

However, you're wrong about them inflating it away. TIPS/ibonds are chump change. You can only buy something like $50k/year, but the .gov currently owes a tad over $8 trillion, with unfunded liabilities from medicare/social security/federal pensions/etc around another $45 trillion.

I'll be the first to admit the $8 trillion debt is a fraud - about $3 trillion of that is intra-gov't debt, so it's only there to keep the sheep happy, but in the real world it would simply be wiped out through a journal entry.

Taxes will not prevent a default since taxation isn't unlimited. There's a theory called the Laffer curve, where the .gov brings in the same amount of revenues from either very high or very low taxes - it's the size of the tax base that changes. Very high taxes will cause the economy to shrink considerably, go underground or offshore.

The new head of the Fed (Bernake or whatever his name is) has decreed that inflation is a good thing and has guaranteed inflation for as long as he's in control.

The United States is an immensely wealthy, diverse and innovative country. We can survive annual inflation of 7-15%/year but it won't be pretty. It may take another 20 years, but by then you'll hear some younger version of "Big Head Ted" (kill your secretary for fun and profit) Kennedy pounding on the podium in Congress demanding a raise in the minimum wage from $27 to $32/hour, since no reasonable person could expect to pay their bills at $27/hour.

Bottom line: The dollar is garbage. It will ultimately fail. I'm pretty confident it won't in the next 5 years. I'll be utterly shocked if it takes more than 15-20. You can keep your dollars and t-bills, I'm buying commodities.
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