Picking up stakes? Don't let the capital-gains tax blow you away

It's finally happened. You've been offered a promotion - from a junior-executive role at corporate headquarters in New York to the post of branch manager in East Podunk.

It's a big enough step up professionally that you aren't worried that East Podunk might be a little, well, quiet. And after spending what seems like years on commuter trains in and out of Manhattan, the idea of living just a few minutes' drive from work sounds heavenly.

But then something starts nagging at you. A little phrase at the back of your mind - capital gains.

Gosh, you finally realize. If I sell my house in New York, and buy the same-size place in East Podunk, for probably half the money, I'll have to pay capital-gains taxes!

Are there any strategies for minimizing the tax bite?

Yes, there are, explains Connie S. P. Chen, a certified financial planner with Chen Planning Consultants Inc. in New York.

But she suggests that before getting into what she calls the ''acrobatics'' of elaborate tax shelter or deferral strategies, you should realize that long-term capital-gains tax isn't all that terrible.

''It's only 20 percent, and that's if you're in the 50 percent marginal tax bracket, which is the highest. You may be paying much less than that.''

Moreover, any big decision like this needs to be made in light of a total financial plan, not in a vacuum. ''You always go back to the basics: net worth, liquidity, cash flow, and your tax bracket.''

If you are in a low marginal tax bracket, your best course may be to take your lumps and reinvest your gain - perhaps in a vehicle that will help you educate your children, if you have any.

If you are in a high tax bracket, Ms. Chen suggests exploring one of these strategies:

* If you're approaching, or already past, your 55th birthday, this might be the time to take advantage of the once-in-a-lifetime capital-gains exclusion of of the last five years.

* Especially if you have a low-interest loan on your current home, you might want to keep it and rent it out, then rent or buy in the new location. If you have built up considerable equity in the house you're in now, a home-equity loan might let you make the down payment on a house in the new area. ''But people shouldn't take a home-equity loan lightly,'' Ms. Chen warns.

* You might sell your home in installments, thereby spreading out the tax liability, and perhaps getting the advantage of a lower tax rate later on. This idea might appeal to the buyer, who, assuming some inflation, would make payments in cheaper dollars over time.

* You might arrange to sell the property in installments to a relative (presumably one in a lower tax bracket), who could then rent the house out and use the rental income to make the installment payments.

* If you sell at the end of the year, you might divide the sale into installments to get the capital gain in two tax years.

Like Ms. Chen, Claire S. Longden warns against ''letting the tail wag the dog'' when it comes to concern about capital-gains taxes. Ms. Longden, a certified financial planner and first vice-president in the New York office of Butcher & Singer, the brokerage, advises: ''If the taxes are going to be really horrendous - a net gain of $500,000 or $600,000, say, then you might want to try to do something - but there isn't really much you can do.''

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