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Tax, SDIRAs & Cost Segregation

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Todd Rasmussen
  • Rental Property Investor
  • Clarksville, TN
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Tax creativity on owner finance (with step up in basis)

Todd Rasmussen
  • Rental Property Investor
  • Clarksville, TN
Posted Dec 13 2019, 10:03

I'm about to make an offer on a SFH portfolio. The owner passed in the last couple of months and his children are selling his portfolio. He's owned the homes for a long time and they are currently titled in LLC, I'm sure being retitled into a trust prior to sale. Since all homes need lots of attention, the seller is willing to carry back down amount and I'm planning about going to a commercial lender for the majority of the purchase price; then using cash on hand to renovate.

My questions for the tax pros / creative deal makers are:

How much of a step up in basis is allowed at time of inheritance for the seller and does it apply to investment properties?

If the seller is planning on investing the money as a nest egg for their retirement at some point they will be paying tax on it?

Now it all comes together:

If I overpay for these properties in exchange for 0% owner financing, then I would have greater depreciation write off and a higher basis in the portfolio.

Would the seller would have income tax free as long as the purchase didn't exceed their basis?

If they sold the note at a discount, then would they get to show a loss from the sale?

Finally, do I sound like I missed my calling? Or like my CPA really needs to return my voicemail?

Most importantly, any pros/cons I missed? Especially for my side of the deal?

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