So you want to sell your rental property. Do you know what your options are? You do have several. The crux is, how much of your gains do you actually want to keep?
Option 1: Sell your property and pay Capital Gains Tax, Recaptured Depreciation, and if in California, another 3.3% franchise fee to be held for a year.
Result: Lose the most money overall
Option 2: Sell your property and do a 1031 exchange into a equal or greater value property. Defer Capital Gains and recaptured depreciation.
Result: Usually higher property taxes, a new mortgage and the same property management problems.
Option 3: Set up a Charitable Remainder Trust. Put your property in the trust and have the trust sell the property. Pay no capital gains tax.
Result: Lose control of your asset. Receive income from the gains on the principle during your lifetime. On your death, the principle goes to the charity of your choice. Great if you have no heirs and don't need more income than the interest on the principle provides.
Option 4: Set up a Private Annuity Trust. Put your property in the trust and have the trust sell the asset. Spread out the capital gains over a period where you take equal payments for your lifetime.
Result: Lose control of your asset. Trustee will invest. You can defer taking income and let principle grow for a period of time. Your heirs can receive the remainder of the asset on your death.
Option 5: Do a 1031 exchange into a tenant in common property. Defer all capital gains tax and recaptured depreciation.
Result: Receive contractual monthly income. Have no property management headaches. Receive all appreciation on your share of grade A commercial building. Exchange in the future for another property. On your death, the asset passes to your heirs at stepped up basis under current tax law. No capital gains due. No recaptured depreciation. No depletion of asset.
Obviously, these options have been simplified for this article, but you get the gist.
Which option would be your choice?
Sign up right now for a free teleconference and learn more about which is most beneficial for you.
Visit http://www.savegainstax.com and register for the next call.
Or
email Paula at askpaula@savegainstax.com and ask any questions you may have.
