All Forum Posts by: Ari Newman

I'm working on a deal structure and am curious to know if it's possible to get the benefits from an installment sale while still capturing the tax free gains from Sec. 121 ?  The structure:

I want to sell my primary residence to an owner-occupant.  My basis in the property is $200K and the sale price is $300K.  I want to take the tax-free gain from the sale, but my buyer can only put $100K down.  Is there a way to carry a 15-year note for the balance of $200K while still capturing the tax-free gain?  (part of Sec. 121 says that the property must have been your primary residence for 2 out of the last 5 years, so that's where I'm not sure if there's a work-around)

Ari

Thanks all for the feedback.  I realized that I need to clarify a few things.

1.  I worked with a TPA to create a 401K plan for my primary business.  Since we have employees, the company match is caped @ 6% of salary and I can make after-tax contributions that would total the allowed $57K (including Employee elective deferral) for 2020.  I am the trustee of the plan and can invest in real property, notes, etc.  My Employees can only invest in a limited number of securities.

2.  Sooner then later, I will sell this business hence the desire to plan now and create the new entity.

3. Although the new entity may not generate much revenue in Year 1, I would like the ability to continuing making contributions, hence the desire for a Solo 401K vs a Self-Directed IRA. The new business would only have me & possibly my Wife as Employees. (if we take the S-corp route)

The CPA I've worked with for over 10 years is extremely knowledgeable, but knows very little about real estate.  Any recommendations for someone who could work with me to develop a strategy?

Hi All,

I'm trying to determine the best structure, and the necessary entities so that I can create a new Solo 401K (for me/wife) and rollover funds from my existing 401K. My current business (where the 401K plan exists) is a single member LLC, w/Scorp election and in a field not related to real-estate . In the real-estate world, my primary focus has been on rental properties, master-leasing, notes and the occasional quick-flip. I am looking to create a legitimate business, that would pay us a salary and also allow us to continue to make retirement contributions. I'd love some feedback on this idea:

Create a multi-member LLC, (me/wife; later on the kids?) and take the S-corp election. We would primarily act as a property management firm, but only manage properties that our other entities own. We would create management agreements (with ourselves), hold annual meetings, collect rent and pay ourselves a salary, file 1120-S Tax return, etc. The only downside to this scenario, is that most of the rent revenue would become ordinary income in the new company, instead of simply being an entry on schedule E. There might also be some other tax disadvantages that I'm not aware of. Other services that the new company would provide; Notary, project management, etc. All these would be ordinary income activities in my mind.

Given the type of business services that we would provide, is this the best course? Any other suggestions would be most appreciated!

Ari

Thanks for the recommendations and advice.  We have a competent CPA here in Atlanta that can handle the basis and foreign tax credit calculations for our return.

Actually, just looking for a CPA or Mexican Tax attorney (or US attorney familiar with Mexican Law).  My Wife is dual-citizen and is selling a property she inherited in Mexico City. 

Can anyone recommend a tax attorney or CPA who is extremely knowledgeable with Mexican tax law?  We are looking for specific information that relates to the taxation of inherited property and the sale of said property for a Mexican citizen who has "non-resident" status. Thanks

I am working to purchase a home from a seller in my area.  Upon my quick examination of the title in public records, it looks like the home was titled to the Custodian (Equity Trust) FBO the seller's 401k.  The house was purchased through seller financing, and the loan docs contain standard fannie owner-occupant language. (owner-occupying would be prohibited since it's a "personal benefit" to the account owner, correct?)  To make matters worse, the seller's daughter (disqualified person) has been using the home as her personal residence.  This is a friendly deal, and the seller's daughter has told me that the (equity in) house is her parent's retirement nest egg.  I'm not a CPA, attorney, etc. but I feel obligated to at least express concern to the seller's about the situation that they (& their custodian) put them in.  How would the seller begin to un-wind this mess?  How can I as the buyer/investor help? (Aside from buying the property)

thanks

I'm an investor from Atlanta visiting family in the Woodlands this week. I'd love to connect with any local investors who are focused on buy/hold SFR and creative deal makers/ exchangers. Any local meetups scheduled this week?

Ari

hi @andrew.  The 1031 will only work if I've owned for 1 year+ and we havent owned that long.  So I'm searching for alternative ideas

We are getting ready to sell a single-family home that we've owned for less then one year. Our primary goal is to minimize the tax burden so that we can deploy as much of the gain from the sale into the purchase of new rental properties. I'd love some ideas into the some approaches for achieving this goal. The house is most likely a tear-down and will be purchased by a builder/developer who will build a new home or duplex. Let's use some round numbers for this example. PP=$200K, Sale Price=$300K, Gain=$100K Since a 1031 exchange is off the table, here are a few things we've come up with so far:
1. Trade - barter this property for cash flowing rental(s) (I have no idea how this is viewed from a tax perspective. Any CPAs know the answer?)

2. Seller financing - make a little bit extra cash, but this only differs the tax burden for the length of the note. (most likely 12-16 months)

3. Option & Sale - for $10K give someone an option to purchase for $290K after Jan. 1st 2020. The option could expire after 90 days. (once again just a delay on the tax burden)

Other ideas??
Ari