I really do want to help everyone hang onto their capital gains.
However, sometimes things just don't work out.
Recently, I had a client that had a rental he was selling for $410,000. He had paid 200K 3 years ago. He really wanted to get out of the landlord business, and sounded like a good candidate for a 1031 Exchange into a Tenant in Common Property. He thought the whole concept sounded wonderful.
Indeed it would have been, except for a few minor details. He had already done a 1031 exchange into his current rental property. His adjusted basis was only 49K. In addition, he had borrowed against the property and had a mortgage of 300K.
After cost of sale expenses, he only had about 90K equity. That means, he had a bit over 75% debt. There are virtually no good TIC properties that have that kind of debt to equity ratios.
My client would have had to bring about 130K in cash into the exchange to make it work. The numbers actually worked out ok if he took out an equity line on his residence, but it was not something he wanted to do.
A Private Annuity Trust didn't make sense either, as he would have had to pay too many taxes on his mortgage repayment (debt over basis) to justify the costs and benefits.
So, he is in the market to purchase yet another rental property and be a landlord for a while longer until his equity increases to the point where either capital gains saving strategy makes sense for him.
At least he knows now how to plan for his future gains.
Paula Straub
http://www.savegainstax.com
Friday, October 21, 2005
Monday, October 17, 2005
Article from Interview with Paula Straub
Secrets to Deferring Capital Gains Tax
By Sarah Vaughn
Are you tired of the hassles of being a hands-on landlord, but afraid of being nailed by Capital Gains Tax if you sell your current income property?
There is a way out.
It's called a 1031/Tenant In Common (TIC) Exchange , and financial advisor Paula Straub (www.savegainstax.com), who specializes in this kind of deferred capital gains tax investment, says it is an attractive option for owners of investment property who are looking to tap into their equity without having nearly 30% of their profits swallowed by capital gains tax.
"The 1031 Property Exchange program is specifically designed for commercial property owners who have highly appreciated investment properties, " Straub says.
Under the regulations of the 1031/TIC Exchange program, an investment property owner can "exchange" their current commercial property for a "like-kind" investment property of equal or greater value, deferring the payment of capital gains tax and maximizing their profits. A relatively new tax program, the 1031/TIC Exchange program wasn't sanctioned until 2002.
"Many commercial property owners who might qualify for the 1031 deferred tax program don't even know about it" Straub remarks. And she's working hard to let investment property owners with highly appreciated real estate know that they have options.
An experienced financial planner, Straub works as a conduit of information for her clients. For qualified commercial property owners, there are even more benefits to the 1031/TIC Tax Deferred Exchange program.
"You'll have a monthly income stream from an investment property, without all of the hassles that go along with being a hands-on landlord, " Straub advises. "You won't have to deal with the stresses of rent collection every month or after hours plumbing problems. And your new investment property will pass directly to your heirs. Under current tax law, your beneficiaries won't have to pay any capital gains tax. They will receive the property at the stepped-up basis."
Straub understands all of the subtle nuances of the 1031/TIC Exchange program. Her goal is to educate her clients using clear and concise language . She points out that there are three very important elements of this deferred capital gains tax transaction that you don't want to overlook.
"You need an unbiased third party intermediary, a lawyer or qualified CPA, who will handle all of the paperwork for you," Straub says. "You'll also need a quality 1031 Esponsor Sponser Company with access to a portfolio of grade A commercial real estate, and your new commercial investment will have to be serviced by a reliable and experienced property management company."
Working as a liaison between these three companies, Straub advises her clients how they can make the best investment possible. She is one of the few financial advisors who provides over-the-phone consultations about the 1031/TIC Exchange program. A nationwide program, you can learn about this unique investment opportunity from Straub without leaving the comfort of your home.
No one knows the 1031 Deferred Tax program better than Straub, and to many investment property owners, this Exchange Property program may sound like a dream come true. In truth, a 1031/TIC transaction is fairly complicated, and Straub warns that doing it on your own could lead to some unexpected and unsatisfactory results.
"On your own, you can find yourself involved with a 1031/TIC sponser company that doesn't deal with quality real estate investments."
She advises her clients to work with 1031 Investment Exchange companies with solid track records. An investment company that urges an investment in inferior properties, or properties that need a lot of work is only one of the many pitfalls that investors want to avoid.
"Strip malls and apartments that have huge tenant turn-over and require constant maintenance may be a bad investment. You want a 1031/TIC sponser company that handles quality office buildings that are leasing office space to long-term corporate clients."
Involvement with unreliable property management companies that don't service the investment property to the highest possible standards can be another problem for commercial property owners interested in the 1031/TIC Exchange program. Poorly managed properties make investors a target for lawsuits from unhappy tenants, and results in the eventual loss of equity as the building may depreciate instead of increasing in value.
Straub also advises her clients not to use a family attorney or CPA as a qualified intermediary . She connects her clients to qualified third parties who are experienced with the 1031/TIC Exchange program and will handle the transaction according to the strict IRS guidelines.
"There are many deadlines that must be adhered to when you're making this kind of property exchange," Straub says. "If you don't meet them, you'll find yourself paying out of your own pocket the taxes you are trying to defer."
For investment property owners who are interested in the 1031/TIC Exchange program, working with an experienced financial advisor like Paula Straub is the only way to avoid all of the pitfalls of this complicated transaction.
"I've done the research. I know how to find the value. I know which investment companies you should be working with and who to avoid" -- which should give any investor considering the option of the 1031/TIC Exchange program a lot of peace of mind.
Another valuable concept for capital gains deferral is the Private Annuity Trust, according to Paula. Different situations call for different solutions. This will be covered in a follow-up interview.
For more information about the 1031/TIC (Tenant in Common) Exchange program, consult financial advisor, Paula Straub, at http://www.savegainstax.com or send her an email at askpaula@savegainstax.com.
------
By Sarah Vaughn
Are you tired of the hassles of being a hands-on landlord, but afraid of being nailed by Capital Gains Tax if you sell your current income property?
There is a way out.
It's called a 1031/Tenant In Common (TIC) Exchange , and financial advisor Paula Straub (www.savegainstax.com), who specializes in this kind of deferred capital gains tax investment, says it is an attractive option for owners of investment property who are looking to tap into their equity without having nearly 30% of their profits swallowed by capital gains tax.
"The 1031 Property Exchange program is specifically designed for commercial property owners who have highly appreciated investment properties, " Straub says.
Under the regulations of the 1031/TIC Exchange program, an investment property owner can "exchange" their current commercial property for a "like-kind" investment property of equal or greater value, deferring the payment of capital gains tax and maximizing their profits. A relatively new tax program, the 1031/TIC Exchange program wasn't sanctioned until 2002.
"Many commercial property owners who might qualify for the 1031 deferred tax program don't even know about it" Straub remarks. And she's working hard to let investment property owners with highly appreciated real estate know that they have options.
An experienced financial planner, Straub works as a conduit of information for her clients. For qualified commercial property owners, there are even more benefits to the 1031/TIC Tax Deferred Exchange program.
"You'll have a monthly income stream from an investment property, without all of the hassles that go along with being a hands-on landlord, " Straub advises. "You won't have to deal with the stresses of rent collection every month or after hours plumbing problems. And your new investment property will pass directly to your heirs. Under current tax law, your beneficiaries won't have to pay any capital gains tax. They will receive the property at the stepped-up basis."
Straub understands all of the subtle nuances of the 1031/TIC Exchange program. Her goal is to educate her clients using clear and concise language . She points out that there are three very important elements of this deferred capital gains tax transaction that you don't want to overlook.
"You need an unbiased third party intermediary, a lawyer or qualified CPA, who will handle all of the paperwork for you," Straub says. "You'll also need a quality 1031 Esponsor Sponser Company with access to a portfolio of grade A commercial real estate, and your new commercial investment will have to be serviced by a reliable and experienced property management company."
Working as a liaison between these three companies, Straub advises her clients how they can make the best investment possible. She is one of the few financial advisors who provides over-the-phone consultations about the 1031/TIC Exchange program. A nationwide program, you can learn about this unique investment opportunity from Straub without leaving the comfort of your home.
No one knows the 1031 Deferred Tax program better than Straub, and to many investment property owners, this Exchange Property program may sound like a dream come true. In truth, a 1031/TIC transaction is fairly complicated, and Straub warns that doing it on your own could lead to some unexpected and unsatisfactory results.
"On your own, you can find yourself involved with a 1031/TIC sponser company that doesn't deal with quality real estate investments."
She advises her clients to work with 1031 Investment Exchange companies with solid track records. An investment company that urges an investment in inferior properties, or properties that need a lot of work is only one of the many pitfalls that investors want to avoid.
"Strip malls and apartments that have huge tenant turn-over and require constant maintenance may be a bad investment. You want a 1031/TIC sponser company that handles quality office buildings that are leasing office space to long-term corporate clients."
Involvement with unreliable property management companies that don't service the investment property to the highest possible standards can be another problem for commercial property owners interested in the 1031/TIC Exchange program. Poorly managed properties make investors a target for lawsuits from unhappy tenants, and results in the eventual loss of equity as the building may depreciate instead of increasing in value.
Straub also advises her clients not to use a family attorney or CPA as a qualified intermediary . She connects her clients to qualified third parties who are experienced with the 1031/TIC Exchange program and will handle the transaction according to the strict IRS guidelines.
"There are many deadlines that must be adhered to when you're making this kind of property exchange," Straub says. "If you don't meet them, you'll find yourself paying out of your own pocket the taxes you are trying to defer."
For investment property owners who are interested in the 1031/TIC Exchange program, working with an experienced financial advisor like Paula Straub is the only way to avoid all of the pitfalls of this complicated transaction.
"I've done the research. I know how to find the value. I know which investment companies you should be working with and who to avoid" -- which should give any investor considering the option of the 1031/TIC Exchange program a lot of peace of mind.
Another valuable concept for capital gains deferral is the Private Annuity Trust, according to Paula. Different situations call for different solutions. This will be covered in a follow-up interview.
For more information about the 1031/TIC (Tenant in Common) Exchange program, consult financial advisor, Paula Straub, at http://www.savegainstax.com or send her an email at askpaula@savegainstax.com.
------
Wednesday, October 12, 2005
Private Annuity Trusts- Supercharge your Retirement
You have made some great investments in Real Estate or a Stock Portfolio. Congratulations! Now you are ready to retire on your gains. But wait. To benefit from your investment appreciation, you're going to have to sell some or all of those assets.
If you sell your investment property, you will need to pay capital gains tax to the Federal Government, State, and you will also pay recaptured depreciation. If you're in California, add another 3 1/3% in withholding. That's a huge chunk of change, and a big blow to your savings.
If you sell your stocks, you'll be giving up at least 15% to capital gains. There is also no guarantee that the long term capital gains rate will remain at 15% forever. It could increase down the road.
How can you start receiving income but not get hit with huge amounts of tax?
For real property, there is a 1031 exchange into a tenant in common property. This works well for younger investors that don't want to manage property anymore, but still enjoy the benefits of real estate ownership. This is a subject covered in many of my previous articles.
There is another powerful concept. It's called a Private Annuity Trust. These trusts have been around since 1930, but until the last few years have only been done for Estate Planning purposes. The Private Annuity Trust also works extremely well for Retirement Planning. It is fairly complex to set up and administrate, so many financial planners, real estate brokers, CPAs and Attorneys still don't know much about them.
The procedure is basically this.
1. A Private Annuity Trust is established. You, the seller becomes the annuitant.
2. A fair market appraisal is done to determine value.
3. The seller can negotiate a sale price at the appraised value.
4. The property is transferred to the trust and the trust is now the seller of the property and retains the proceeds.
5. The proceeds are invested by trustees (not the annuitant) and an arrangement is made to pay the annuitant (and perhaps their spouse) in monthly payments for the remainder of their lives. The capital gains tax is spread out over the course of your lifetime. If you pass away before your estimated average calculated life span, the remainder of the assets pass to the beneficiaries. The balance will be free of Estate Tax, Gift Tax, Generation skipping tax, and Transfer tax. Any capital gains tax still due will be paid before disbursement.
6. Other properties or stocks can be added to the trust at a later time, and recieve the same benefits.
As an example, let's say you have a million dollar gain on a property. You might very well owe 350K in taxes. With a Private Annuity Trust, all one million goes to work for you, and you can receive montyly income for the rest of your life. The exact amount is determined by your age and the time you choose to begin receiving your payments. You have the option to defer receiving payments until the age of 70 1/2. This allows the assets to grow tax deferred, and allows for greater income in the future.
These assets are removed from your estate, as the trust now owns them and the annuitant relinquishes control over how they are invested.
Setting up a Private Annuity Trust can definitely give a turbo boost to your retirement bottom line. Ask yourself, would you rather give a "gift" to the government in a big lump sum, or would you like to pay in small chunks and have the bulk of your profits working for you and earning compounded interest for years to come?
Find out if you qualify to save thousands in capital gains tax. Ask Paula a question and be on the next information packed teleconference. Sign up right now at http://www.savegainstax.com
If you sell your investment property, you will need to pay capital gains tax to the Federal Government, State, and you will also pay recaptured depreciation. If you're in California, add another 3 1/3% in withholding. That's a huge chunk of change, and a big blow to your savings.
If you sell your stocks, you'll be giving up at least 15% to capital gains. There is also no guarantee that the long term capital gains rate will remain at 15% forever. It could increase down the road.
How can you start receiving income but not get hit with huge amounts of tax?
For real property, there is a 1031 exchange into a tenant in common property. This works well for younger investors that don't want to manage property anymore, but still enjoy the benefits of real estate ownership. This is a subject covered in many of my previous articles.
There is another powerful concept. It's called a Private Annuity Trust. These trusts have been around since 1930, but until the last few years have only been done for Estate Planning purposes. The Private Annuity Trust also works extremely well for Retirement Planning. It is fairly complex to set up and administrate, so many financial planners, real estate brokers, CPAs and Attorneys still don't know much about them.
The procedure is basically this.
1. A Private Annuity Trust is established. You, the seller becomes the annuitant.
2. A fair market appraisal is done to determine value.
3. The seller can negotiate a sale price at the appraised value.
4. The property is transferred to the trust and the trust is now the seller of the property and retains the proceeds.
5. The proceeds are invested by trustees (not the annuitant) and an arrangement is made to pay the annuitant (and perhaps their spouse) in monthly payments for the remainder of their lives. The capital gains tax is spread out over the course of your lifetime. If you pass away before your estimated average calculated life span, the remainder of the assets pass to the beneficiaries. The balance will be free of Estate Tax, Gift Tax, Generation skipping tax, and Transfer tax. Any capital gains tax still due will be paid before disbursement.
6. Other properties or stocks can be added to the trust at a later time, and recieve the same benefits.
As an example, let's say you have a million dollar gain on a property. You might very well owe 350K in taxes. With a Private Annuity Trust, all one million goes to work for you, and you can receive montyly income for the rest of your life. The exact amount is determined by your age and the time you choose to begin receiving your payments. You have the option to defer receiving payments until the age of 70 1/2. This allows the assets to grow tax deferred, and allows for greater income in the future.
These assets are removed from your estate, as the trust now owns them and the annuitant relinquishes control over how they are invested.
Setting up a Private Annuity Trust can definitely give a turbo boost to your retirement bottom line. Ask yourself, would you rather give a "gift" to the government in a big lump sum, or would you like to pay in small chunks and have the bulk of your profits working for you and earning compounded interest for years to come?
Find out if you qualify to save thousands in capital gains tax. Ask Paula a question and be on the next information packed teleconference. Sign up right now at http://www.savegainstax.com
Tuesday, October 11, 2005
Case Study #3 Split TIC and PAT
No two cases are ever quite the same. Some people I can help, and some people I truly can't. Half the fun is in decided who is who.
Take this case. It was a 67 year old lady, a widower. She does have children and grandchildren, but also has to look out for herself.
She has a primary residence, a rental condo and a second mountain home which has been rented for the last few years.
She has gotten to the point where she can use some extra income, and does not want the hassles of property management.
She purchased the mountain home in 1994 for 200K. It now is worth 790K. She owns it outright. She wants to sell, but found out she would owe 100K in capital gains tax. It's hard to give up that kind of money to Uncle Sam.
After going over her needs and options, the best choice for her will be to split the proceeds between a 1031 exchange into the tenant in common property and a private annuity trust.
Both will provide her a monthly income. She will being taking payments immediately from the PAT, and will slowly deplete that asset over time. The other half, she will also receive an income from (about 2K/mo) and that income will increase over time. She can later do another exchange and continue to increase her income. The TIC will pass to her heirs at the stepped up basis. She can always add that asset to the PAT at a later time, if the situation warranted it.
She is now very diversified, and she has a stable income which allows her to live very comfortably. Part of her assets are removed from her estate, so her heirs will not be faced with large amounts of estate taxes at her passing.
Bottom line, she has that 100K working in her favor for years to come.
Paula Straub
http://www.savegainstax.com
Take this case. It was a 67 year old lady, a widower. She does have children and grandchildren, but also has to look out for herself.
She has a primary residence, a rental condo and a second mountain home which has been rented for the last few years.
She has gotten to the point where she can use some extra income, and does not want the hassles of property management.
She purchased the mountain home in 1994 for 200K. It now is worth 790K. She owns it outright. She wants to sell, but found out she would owe 100K in capital gains tax. It's hard to give up that kind of money to Uncle Sam.
After going over her needs and options, the best choice for her will be to split the proceeds between a 1031 exchange into the tenant in common property and a private annuity trust.
Both will provide her a monthly income. She will being taking payments immediately from the PAT, and will slowly deplete that asset over time. The other half, she will also receive an income from (about 2K/mo) and that income will increase over time. She can later do another exchange and continue to increase her income. The TIC will pass to her heirs at the stepped up basis. She can always add that asset to the PAT at a later time, if the situation warranted it.
She is now very diversified, and she has a stable income which allows her to live very comfortably. Part of her assets are removed from her estate, so her heirs will not be faced with large amounts of estate taxes at her passing.
Bottom line, she has that 100K working in her favor for years to come.
Paula Straub
http://www.savegainstax.com
Case Study #3- Split TIC and PAT
No two cases are ever quite the same. Some people I can help, and some people I truly can't. Half the fun is in decided who is who.
Take this case. It was a 67 year old lady, a widower. She does have children and grandchildren, but also has to look out for herself.
She has a primary residence, a rental condo and a second mountain home which has been rented for the last few years.
She has gotten to the point where she can use some extra income, and does not want the hassles of property management.
She purchased the mountain home in 1994 for 200K. It now is worth 790K. She owns it outright. She wants to sell, but found out she would owe 100K in capital gains tax. It's hard to give up that kind of money to Uncle Sam.
After going over her needs and options, the best choice for her will be to split the proceeds between a 1031 exchange into the tenant in common property and a private annuity trust.
Both will provide her a monthly income. She will being taking payments immediately from the PAT, and will slowly deplete that asset over time. The other half, she will also receive an income from (about 2K/mo) and that income will increase over time. She can later do another exchange and continue to increase her income. The TIC will pass to her heirs at the stepped up basis. She can always add that asset to the PAT at a later time, if the situation warranted it.
She is now very diversified, and she has a stable income which allows her to live very comfortably. Part of her assets are removed from her estate, so her heirs will not be faced with large amounts of estate taxes at her passing.
Bottom line, she has that 100K working in her favor for years to come.
Paula Straub
http://www.savegainstax.com
Take this case. It was a 67 year old lady, a widower. She does have children and grandchildren, but also has to look out for herself.
She has a primary residence, a rental condo and a second mountain home which has been rented for the last few years.
She has gotten to the point where she can use some extra income, and does not want the hassles of property management.
She purchased the mountain home in 1994 for 200K. It now is worth 790K. She owns it outright. She wants to sell, but found out she would owe 100K in capital gains tax. It's hard to give up that kind of money to Uncle Sam.
After going over her needs and options, the best choice for her will be to split the proceeds between a 1031 exchange into the tenant in common property and a private annuity trust.
Both will provide her a monthly income. She will being taking payments immediately from the PAT, and will slowly deplete that asset over time. The other half, she will also receive an income from (about 2K/mo) and that income will increase over time. She can later do another exchange and continue to increase her income. The TIC will pass to her heirs at the stepped up basis. She can always add that asset to the PAT at a later time, if the situation warranted it.
She is now very diversified, and she has a stable income which allows her to live very comfortably. Part of her assets are removed from her estate, so her heirs will not be faced with large amounts of estate taxes at her passing.
Bottom line, she has that 100K working in her favor for years to come.
Paula Straub
http://www.savegainstax.com
Friday, October 07, 2005
Case Study #2 - Private Annuity Trust
Usually, for appreciated real estate, I find the 1031 Exchange into a Tenant in Common Property carries the most advantages. But, there are some cases where the Private Annuity Trust is the way to go.
Ken and Nancy sold their apartment complex a year ago and purchased another. At that time, they paid no capital gains tax because they did a 1031 exchange for like kind property.
Ken began having health problems, and no longer wanted the management hassles of running a complex. Ken and Nancy have other real estate and didn't want to do another 1031 exchange. Since they need to slow down and enjoy life more, they wanted a larger income. They have no heirs.
Ken and Nancy formed a Private Annuity Trust and had transferred the complex into the trust after they'd found a buyer. The trust sold the property, and both Ken and Nancy will be receiving an income from that property for the rest of their lives. They will be paying small amounts of capital gains from each payment over the years, but most of that money (1 million dollars)will be working for them for years to come. They pay no penalties or extra interest, so the gains paid out over time are only the ones realized at the time of sale. Any monies left in the trust at their death will go to their favorite charity. If they'd had heirs, this money would have passed to them free of estate tax, gift tax, generation skipping tax, and transfer tax.
Ken can take it easy and hopefully live a less stressful and pleasant life. Nancy is grateful to have a steady income, a good portion of which is tax free, as it is a return of basis.
In this case, the Private Annuity Trust was the perfect solution.
Stayed tuned for the next case study coming soon.
Paula Straub
http://www.savegainstax.com
askpaula@savegainstax.com
Ken and Nancy sold their apartment complex a year ago and purchased another. At that time, they paid no capital gains tax because they did a 1031 exchange for like kind property.
Ken began having health problems, and no longer wanted the management hassles of running a complex. Ken and Nancy have other real estate and didn't want to do another 1031 exchange. Since they need to slow down and enjoy life more, they wanted a larger income. They have no heirs.
Ken and Nancy formed a Private Annuity Trust and had transferred the complex into the trust after they'd found a buyer. The trust sold the property, and both Ken and Nancy will be receiving an income from that property for the rest of their lives. They will be paying small amounts of capital gains from each payment over the years, but most of that money (1 million dollars)will be working for them for years to come. They pay no penalties or extra interest, so the gains paid out over time are only the ones realized at the time of sale. Any monies left in the trust at their death will go to their favorite charity. If they'd had heirs, this money would have passed to them free of estate tax, gift tax, generation skipping tax, and transfer tax.
Ken can take it easy and hopefully live a less stressful and pleasant life. Nancy is grateful to have a steady income, a good portion of which is tax free, as it is a return of basis.
In this case, the Private Annuity Trust was the perfect solution.
Stayed tuned for the next case study coming soon.
Paula Straub
http://www.savegainstax.com
askpaula@savegainstax.com
Monday, October 03, 2005
Case Study #1 1031/TIC exchange success
I've decided to start posting some case studies where clients have successfully saved thousands in capital gains tax. Hopefully, one of these will hit home and be similar enough to your situation so that you can save plenty yourself.
The names have been changed to protect client confidentiality.
Mary had 3 rental properties that she purchased many years ago. They weren't in the best locations and had become negative cash flows. She was having to put in several hundred dollars of her own money each month to cover costs.
Mary had had trouble with renters trashing the property and not paying rent on time. She had thought a lot about selling, but didn't want to see about one third of her gains disappear.
One day unexpectedly, Mary lost her job. She got behind in bills. She knew she had to do something fast. Mary found out about the 1031 exchange into a tenant in common property. It meant she could get an income, still own property, but not have the property management hassles. She sold one property below market value as a cash sale, because she needed money fast. With her equity of 200K she exchanged for a TIC. The entire process took only a few weeks. She began receiving $1000.00/mo.
Mary was able to sell the other two properties at market rate. The additional 400K equity brings in another $2000.00/mo. A good portion of that is non-taxable income. Mary has all of her capital gains working for her. She paid no capital gains tax or recaptured depreciation.
Mary is actually bringing home more money now than she did from her job. She is taking her time and deciding what she really wants to do with the rest of her life. She has enough passive income to cover her personal expenses. She still is a real estate owner, and her assets will continue to appreciate over time. So will her income.
Mary is extremely happy and grateful. Her life has changed permanently for the better.
If Mary's situation is similar to your own, perhaps now is the time for you to look into a 1031 exchange into a tenant in common property. I can help you determine if this is a good choice.
Paula Straub
http://www.savegainstax.com
askpaula@savegainstax.com
The names have been changed to protect client confidentiality.
Mary had 3 rental properties that she purchased many years ago. They weren't in the best locations and had become negative cash flows. She was having to put in several hundred dollars of her own money each month to cover costs.
Mary had had trouble with renters trashing the property and not paying rent on time. She had thought a lot about selling, but didn't want to see about one third of her gains disappear.
One day unexpectedly, Mary lost her job. She got behind in bills. She knew she had to do something fast. Mary found out about the 1031 exchange into a tenant in common property. It meant she could get an income, still own property, but not have the property management hassles. She sold one property below market value as a cash sale, because she needed money fast. With her equity of 200K she exchanged for a TIC. The entire process took only a few weeks. She began receiving $1000.00/mo.
Mary was able to sell the other two properties at market rate. The additional 400K equity brings in another $2000.00/mo. A good portion of that is non-taxable income. Mary has all of her capital gains working for her. She paid no capital gains tax or recaptured depreciation.
Mary is actually bringing home more money now than she did from her job. She is taking her time and deciding what she really wants to do with the rest of her life. She has enough passive income to cover her personal expenses. She still is a real estate owner, and her assets will continue to appreciate over time. So will her income.
Mary is extremely happy and grateful. Her life has changed permanently for the better.
If Mary's situation is similar to your own, perhaps now is the time for you to look into a 1031 exchange into a tenant in common property. I can help you determine if this is a good choice.
Paula Straub
http://www.savegainstax.com
askpaula@savegainstax.com
Subscribe to:
Posts (Atom)