Defer Taxes on Real Estate Profits

18 Replies

Originally posted by @Marc Carithers :

Any landlords or investors know of ways you can defer taxes on real estate profits? 

1031 Exchange or live in it for 2 years. 

These are for older clients or clients who are pretty heavy in real estate and don't want to sit through another cycle. There is a program can keep 95% of their returns tax free

(213) 545-1860

The best way to defer for these types of clients is for them to do an Owner Carry on the sale, if at all possible.  

If they carry the note, they can continue to get passive income in the form of a monthly check for the paydown of the note.

They will still need to recognize the Depreciation Recapture in the year title transfer takes place, which can still sting quite a bit for those who have had the property a long time, but the Capital Gains taxes can be recognized little by little over the life of the note.

Originally posted by @Brian Garrett :
Originally posted by @Marc Carithers:

Any landlords or investors know of ways you can defer taxes on real estate profits? 

1031 Exchange or live in it for 2 years. 

Just to be clear on the 2 year issue - there is still depreciation recapture.  But the Capital Gains taxes will be avoided in this scenario.

1031 is the only true way to defer 100% of the taxes owed on a transaction like this. 

Originally posted by @Marc Carithers :

These are for older clients or clients who are pretty heavy in real estate and don't want to sit through another cycle. There is a program can keep 95% of their returns tax free

 You seem to already know the answer to your own question.  Do tell.

I agree on 1031 is the only true way this is a case if you DO NOT want to maintain an investment in real estate. 

(213) 545-1860

something smells fishy - 

It appears that you openly asked a question in an attempt to sell something.

The "direct message me for further details" should be coming soon.

Basit Siddiqi, CPA
917-280-8544

Hi @Marc Carithers

You seem to be new to the forums. Welcome. We're a great bunch of investors here, and our community has their own rules, both implied and stated.

If you have something to share, please do. You're talking to some of the most dedicated real estate investors that exist, and we all love learning new ways to keep more of our money. We are a free-sharing group.

However please note that our site rules expressly prohibit solicitation, self-promotion, and advertising. So if you've got something to sell, the only place you can post that is the Marketplace Forum.

Mindy Jensen, Real Estate Agent in CO (#FA100049656)

I am not selling anything, I am an investor and am planning on doing this myself as there is a way to do an installment sale and take the proceeds and invest it into an annuity. I was just curious if any other savvy investors were aware of this option. 

(213) 545-1860
Originally posted by @Brian Garrett :
Originally posted by @Marc Carithers:

Any landlords or investors know of ways you can defer taxes on real estate profits? 

1031 Exchange or live in it for 2 years. 

Pretty much summarized the best two options, but since the investors are older, there is a third option. Hold until death.

@Dan Mahoney The reason for the post was to find out more. Can you please let me know more details? I wanted insight in this strategy.  I am trying to weigh the pros and cons if I am anticipating letting go of some of my properties if I don't want to sit through another real estate cycle. 

(213) 545-1860

@Marc Carithers I included links with pretty detailed information on the two transaction structures I thought (maybe) you were contemplating.  Both are well known strategies.

You are asking an abstract question.  The pros and cons of any transaction structure depend on the facts and circumstances of the transaction and the person or entity doing it.  Perhaps if you laid out the specifics of your deal and your overall financial situation you could get some feedback from this forum about what flavor of installment sale might work best for you.

For the record, I don't sell any of this stuff.  @Jon Holdman @Mindy Jensen

Here are three Bigger Pockets threads from the last few months that discuss this topic in more direct way:

https://www.biggerpockets.com/forums/432/topics/49...

https://www.biggerpockets.com/forums/51/topics/323...

https://www.biggerpockets.com/forums/51/topics/495...

@Dan Mahoney Great thank you! Well I have my personal situation in addition to being a real estate agent I have other clients to be the best service to myself and others I am doing my best to educated on everything! Thank you very much!

(213) 545-1860

All,

Just had the workshop apparently there are 5 ways to deal with your property:

1. Sell and take the capital gains tax (In Cali can be close to 43% with Federal, State, Depreciation Recapture, Investment etc)

2. Installment Sale (Lender gives promissory note which is usually around 10 years deferment)

3. 1031 Tax Free Exchange (Transfer to another market or equal or larger real estate)

4. Deferred Trust Sale (Place in Trust and have trustee manage assets - {annual costs}

5. Monetized Installment Sale (Lender, Dealer involved allows Seller to receive 95% of their profits as loan where they can defer capital gains for 30 years)

Obviously there is more involved in every strategy but that is the basic summary of each. 

(213) 545-1860

1031 into a REIT?

@Marc Murphy , You can't 1031 into a reit.  A 1031 must be a sale of investment real estate followed by a purchase of investment real estate.  A purchase of a reit is a purchase of a security that holds real estate.

If you're wanting truly passive real estate and the ability to defer taxes through the 1031 exchange then you can look at NNN properties, Delaware Statutory trusts, and Tenant In Common Structures.

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