Way to sell without incurring capital gains?

[Carole G.]

We would like to sell several properties, pay off a few others, without giving a huge chunk to the IRS.  Is there a way to do this?

[Dave Foster]

@Carole G.,  Consolidation like you're considering is becoming increasingly common.  You'll likely end up paying some tax but minimizing it and putting yourself into a more conservative less leveraged position using some strategic avenues.  

1. One strategy would be to create a metrix to identify those properties of yours that would yield the greatest amount of cash but have the least gain and that you've owned for the shortest time (but still over a year so the gain is capital not ordinary income) so that your depreciation recapture is minimized. Use the sales of these properties to pay off debt on the others.  

2. An alternative would be to maximize the leverage on a few and use that to pay off your best producers so your debt and debt risk are consolidated into fewer properties.

3. Yet a another way that our clients are having success with is combining the first strategy with the sale and 1031 exchange of other properties into fewer but larger properties and using the cash from the strategic sales to allow to own the exchanged properties debt free.