New tax deferral for real estate sales
beyond the 1031 “like kind” exchange.
With Real Estate values escalating at such an enormous rate, many real property owners or investors would like to cash in on values but do not want to take the tax hit. Some are not interested in rolling all the money in another 1031 exchange with prices this high. Some don’t want to give up income but are tired of the day to day management of property, the high cost of property taxes, huge insurance bills, and hurricane and casualty risks. Then there is the 35% tax on all the income.
The solution may be an IRC Sec. 453- Structured Sale. This allows a seller to defer taxation on almost any portion of sales proceeds over any period of time chosen. How can this be? The arrangement is handled by a specially guaranteed payment contract that pays the seller interest on all of the money deferred.
In the past, this arrangement would need the buyer to be a large entity of huge financial stability for sellers to be interested. Now it can be done with a new security assignment arrangement by a large A+ rated Life Insurance Company who guranteed the payments will be made..
For now the only highly rated insurance company offering the arrangement will work though a small select group of companies experienced in molding assignment obligations into legal and tax related transactions. These transactions must be done accurately and the experience of the companies assisting your tax and or legal council is vital to the process. One of the few companies’ chosen nationwide is The James Street Group. They were chosen for their 15 years of experience and specialization in this type of transaction.
For sellers who want to replace income, payments can be tailored to fit their needs and taxed partly at the more favorable capital gains rate instead of at the ordinary income rate.
Though the installment sale arrangement is certainly not for everyone, there is a broad range of uses for those property owners planning or in retirement, those wanting to replace income-producing property with tax advantaged “no hassle” income, or anyone wanting to defer the gain on a sale of property. There are even advantages for Real Estate investors that are hesitant to sell and lose a large lump sum to IRS that could be used as a down payment on the next project, but don’t want to be hurried into 1031 exchange.
For more information or to see samples of income streams that may fit your particular situation contact Randy Gassman of The James Street Group directly at 813-885-5900 or rgassman@tjsg.com.
