Hey BP Nation!,
i have a question and i hope I'm posting it in the right place.
so, one of my mentors in this business is considering selling his portfolio as he is 'up in age' now. after many discussions about his exit strategy he told me today that he has an offer on the table on the table right now. someone wants to buy al his properties. he doesn't want to sale and pay all the capitol gains taxes, and thereby lessen the estate he would leave to his only son.
there are 60 b- c+ units across 2 cities. no mortgages. no vacancies.
is there a strategy that will allow for a transfer to a new owner without the big tax hit?
is this even possible?
Yes he can create a limited partnership and give the main interest to his son and still remain in control of the property so when he sells the property he will only get taxed on the percentage that he owns. I would tell him to go speak to a CPA with experience in estate planning! Hope this helps! Great book in regards to this is "Tax free wealth-Rich Dad Series"
He may also be able to see some tax relief if he does an installment sale (kind of like an owner carry of the note, but slightly different). This will allow him to spread the capital gains over the term of the sale.
The very, very best way would be to hang on to the properties and will them to his son. His son will receive a "stepped up" basis on the valuation and can either then take over the rental income from there or sell the properties using the value on the day of death as the basis, thus generating very little capital gain. However, if the total amount of the state exceeds the estate tax limits, there may be some tax payable within the estate.
He should talk to a CPA and/or an estate attorney to figure out how to best structure his particular scenario. It's tough to say what would be best without knowing the larger picture.
@Skylar Dejesus thank you for the resource and the response.
@Linda Weygant we talked about this. i think. he was wiling to do a bond for deed and even with the installments he pay taxes.
i'm thinking along the lines of an agreement that will trigger in the future. also i heard that an individual can make money tax free after retirement age or 72. it that not true?
or is that only related to social security?
Taxes can be minimized or deferred, but not avoided. At 60 units, this deal needs to be sent to a good tax attorney and/or CPA for structuring.
Yes there is email me at [email protected] or call me at 4044182155 preferably ill give you the skinny on how to do this
I'm not a tax professional, but if he can wait to hand it over to his son, his son can inherit the properties when he passes. Therefore his son will 'step into' his property basis at fair market value. Therefore, the tax will be minimal or none at all.
If he gives seller financing (installment sale), he will only pay taxes as he receives payments.
NA NA- thank you for your response. ig he does nothing then and the properties pass to his son then sale price would almost double to fair market value. At that point my offer would seem low ball. He knows this already. Part of the levage i have is that his son is uninterested in owning rentals. So the challenge is to create a situation whereby I either own or control the units and the seller receive monthly payments avoiding or greatly minimizing tax exposure. If something of this nature can be structured then we will have a deal.
He needs to talk to a competent estate planning lawyer in his state. There are numerous ways to get around this if his goal is to get the properties to his family but they take time.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing