How Entrepreneurs Can Handle the Capital Gains Tax

A couple of things to keep in mind if you are an entrepreneur and want to deftly handle the capital gains tax.  First, if you have an asset, make sure to hold onto it at least a year. Capital assets that are held onto for less than a year are taxed at the ordinary income tax rate. The capital gains tax rate is unpleasant, the ordinary rate is worse.  If you can hold on to the asset for just a little longer, than do so.  Second, if you are looking to get out of owning an asset but may be replacing it with a similar type of asset, then see if you can do a like-kind exchange.  A like-kind exchange allows you, for example, to take a piece of real estate and exchange if for another piece of real estate without triggering the capital gains tax.  Any built in gain is simply transferred to the new piece of property.  A like-kind exchange won’t work in every situation, but it is pretty flexible.  Lastly, if you have held on to an asset for a long-time, and it has appreciated significantly, consider keeping it until after your death.  One of the only good things about dying is that you get a basis bump at death which will essential clear the slate on the capital gains tax.  Sell another, less appreciated asset and hold onto the one with the bigger tax hit.

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