Monday, October 08, 2007

A Good Problem to Have

It is true, the more money you have, the more options you have. That’s all good, and evidenced by a recent situation I encountered.

A man and his wife in their mid-fifties were receiving their portion of family real estate holdings in an upcoming sale. Their portion of the gain was 4.5 million dollars. They live in California, and there was depreciation recapture involved, so their tax obligation was over 1.3 million dollars if they sold outright and paid their tax bill.

We discussed many options and there was no bad plan. Most of us would be thrilled to have the choices they did. This was not their only asset or source of income. Even if they paid their taxes it would not have affected their current or future life style.

What they decided to do was a bit surprising, but given their situation, it worked for them.

They chose to do a 1031 exchange, but their choice of exchange property was a 4.5 Million dollar single family home that they eventually want to make their primary residence.

They plan to rent it out for a couple of years (who actually rents a 4.5M house?) to satisfy the exchange rules and then move in.

Even in California, 4.5M buys a pretty darn nice property. I can’t even fathom paying property taxes, insurance costs and upkeep on an annual basis- even if there is no mortgage. But then again, this is a problem I would love to have!

As you can tell, this couple can afford to take a loss if they have to. They have other assets and income which are unrelated to this property, and have options most of us will never have to worry about deciding between.

Their biggest concern going forward will be estate planning for passing wealth tax efficiently to future generations. (lucky kids)

I wonder if they have any interest in “adopting”. I am going to throw my hat in the ring.

Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at
http://www.savegainstax.com/sales.php

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