All Forum Posts by: Dan Becker

 Thanks, Joey.  

 Hi Katie,  thank you for the reply.  Correct I am not the child of the owner.  I am not planning to qualify for the parent-child exclusion.  I mentioned it only as one of the interests of the owner / children that I would have to address for a proposed sale.

I could benefit from it (I believe) if I offered some type of lease option. Where we agree to a future sale, with seller financed payment terms today that are paying the T&I.

Thank you for the reply. I just skimmed a short summary on 721 + 1031 deals. To confirm, the idea is that the owner would exchange proceeds from the home sale, for fractional ownership in an REIT institutional grade property with an intermediary (1031 portion). Then after 2 years that fractional ownership is exchanged for shares/member units in the REIT (721 UPREIT portion)?

Assuming that is close to correct, I think the owner will likely find this complicated and make it a hard sell.  How often / mainstream does this type of transaction occur?

I am hoping to find a more simple / crude (maybe) way to engineer a deal that simply holds the final sale until after the owner's title converts to the irrevocable trust, but based on the terms agreed to today.

Hi All,

I am looking for deal structure suggestions on a unique situation that involves a home held in trust.

I have a seller who owns and rents out an SFR that has an FMV of $~2M. He and his wife hold it in a revocable trust with plans for the asset to be distributed to his adult children. The property is in California, so the children will get the benefits of a locked-in property tax assessment value that is at least half of similar properties ($27k), and when the children do sell, they will get a step-up in cost basis for ~$1.6M on the eventual sale. Assuming a 30% tax on the gain, I am ballparking that benefit to be a $480k tax shield for the children.

However, the owners would prefer to sell now.  Primarily because home prices in the area are expected to flatline / deflate/ correct,  but also because the property was built in the 50s and more serious deferred repairs and maintenance are starting to compound.  It is becoming a lot for the 80-year-old owners who are expecting greater costs in time and dollar (self managed).

Is there any creative deal structure that can be used so that I can buy and occupy the home including the assumed improvements, repairs and maintenance, while allowing the seller to preserve the step-up tax shield for their descendants?  The other constraint, the seller is not interested in a 1031 exchange if it means owning/managing another property.

So far, the only concept I can think of is something like a contingent title transfer upon closing.   I'm not sure if there is such a deal structure or even the risks involved if engineered,  but the idea would be that the title doesn't really transfer / and a final balloon payment isn't made until after the property actually transfers to the children.   

Is this a feasible concept, are there other concepts to consider?

All thoughts welcome, and thank you!

--DB