Bill owned an investment property that had appreciated a lot in value. He had depreciated it completely over the years.
Bill’s adjusted cost basis was $0. His straight line depreciation was 200K. The selling price after closing costs was 1.2 million. His gain is 1.2 million and of that 200K is taxed at depreciation recapture rates, and 1 million is taxed as capital gain.
Bill is 62 years old and lives in Utah where capital gains are taxed at 5%.
Bill did not want to do a 1031 exchange and wanted the maximum amount of proceeds to be kept in his family. A Self Directed Installment Sale was his vehicle of choice.
If Bill had sold and paid all taxes upfront, he would have owed about 264K in taxes.
By structuring the sale correctly, Bill chose a 25 year payout so it would most likely last him the rest of his life. He is single and has one son who is financially sound.
By spreading out the repayment of capital gains and depreciation recapture over 25 years, Bill was able to recognize a savings of approximately 241K .
Assuming Bill paid his taxes, invested the proceeds at 6% interest and took withdrawals to live on over a 25 year period, his annual income would be approximately $73,056.00 per year.
By deferring and spreading out the tax repayment over 25 years and assuming that the proceeds are also invested at 6% during the payout phase, his annual income is $93,661.00 per year.
In these crazy times, can you use the extra income, or do you prefer to give it to the IRS?
Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html
Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net
Tuesday, March 03, 2009
Tuesday, February 24, 2009
How Painful Has This Year Been For You?
I don’t know about you, but this past year has been a real “bear” in more ways than one!
Not long ago, the calls and emails I received were primarily from relatively happy individuals who had found a buyer for their appreciated real estate, businesses, etc. and were looking to minimize their capital gains taxes.
Fast forward to today. More and more calls and emails are from people who
have been trying to sell their assets for a very long time, and few are having any success. Here are the most common dilemmas:
They are getting low-balled on the offers that do come in and are determined to wait for the values to go back up
They are getting close to losing the properties because tenants have pulled out, they are behind on mortgage payments, or buyers offers are dependent on the sale of another property
The most common is that buyers, even though they are supposedly prequalified for loans, are unable to get the loans, and this is happening right up to the day of close.
The saddest calls of all are from investors who have had to go through short sales on investment properties they bought at the top of the market and now are finding out that they owe income tax on the amount of debt forgiven by the lender. In some cases, this amounts to tens or hundreds of thousands of dollars which the person does not have, and they face possible bankruptcy or insolvency.
As much as I’d like to help with these things, when you aren’t able to sell at a profit, I have no tax strategy to help save on your tax bill. I sure wish I did, because I’d be the most popular person around. Until credit frees up, real estate prices stabilize and confidence is restored we are all pretty much at a standstill and it stinks.
Just realize, if any of the situations above are similar to yours, you are in very good company. Let’s hope all these stimulus packages using our tax dollars have the desired effect. Personally, I can’t wait for the day to get happy calls again!
If you do have a cash buyer that makes even close to a reasonable offer, think real hard before turning them away. They are far and few between and it will be a good while before it is once again a sellers market.
Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html
Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net
Not long ago, the calls and emails I received were primarily from relatively happy individuals who had found a buyer for their appreciated real estate, businesses, etc. and were looking to minimize their capital gains taxes.
Fast forward to today. More and more calls and emails are from people who
have been trying to sell their assets for a very long time, and few are having any success. Here are the most common dilemmas:
They are getting low-balled on the offers that do come in and are determined to wait for the values to go back up
They are getting close to losing the properties because tenants have pulled out, they are behind on mortgage payments, or buyers offers are dependent on the sale of another property
The most common is that buyers, even though they are supposedly prequalified for loans, are unable to get the loans, and this is happening right up to the day of close.
The saddest calls of all are from investors who have had to go through short sales on investment properties they bought at the top of the market and now are finding out that they owe income tax on the amount of debt forgiven by the lender. In some cases, this amounts to tens or hundreds of thousands of dollars which the person does not have, and they face possible bankruptcy or insolvency.
As much as I’d like to help with these things, when you aren’t able to sell at a profit, I have no tax strategy to help save on your tax bill. I sure wish I did, because I’d be the most popular person around. Until credit frees up, real estate prices stabilize and confidence is restored we are all pretty much at a standstill and it stinks.
Just realize, if any of the situations above are similar to yours, you are in very good company. Let’s hope all these stimulus packages using our tax dollars have the desired effect. Personally, I can’t wait for the day to get happy calls again!
If you do have a cash buyer that makes even close to a reasonable offer, think real hard before turning them away. They are far and few between and it will be a good while before it is once again a sellers market.
Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html
Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net
Tuesday, February 10, 2009
Tips For Getting Through Tough Times #2
The last email talked about the possibility of getting a cash offer for a life insurance contract that was no longer needed, expiring, and/or affordable.
Here is another potential source of lump sum value for an annuity contract in the payout phase. Potential individuals who may benefit are those
Whose payments are not providing enough to live on
Who are receiving payments tied to an extremely low interest rate
Whose health has changed and the need for additional money is great
Who have inherited an annuity and are forced to take the balance as a payment stream when a lump sum is more valuable to them.
If you or anyone you know is in this situation please email me or give me a call. I can let you know if a company is willing to make an offer for consideration.
Not all policies will qualify, but if yours does it may mean that you have the ability to access money you did not think you had and cover whatever expenses are at hand. There is no obligation to accept any offer made.
If you have any questions don’t hesitate to call or pass this email to someone who might benefit.
Paula Straub
www.savegainstax.com
savegainstax@gmail.com
M-F 8am-5pm PST
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html
Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net
Here is another potential source of lump sum value for an annuity contract in the payout phase. Potential individuals who may benefit are those
Whose payments are not providing enough to live on
Who are receiving payments tied to an extremely low interest rate
Whose health has changed and the need for additional money is great
Who have inherited an annuity and are forced to take the balance as a payment stream when a lump sum is more valuable to them.
If you or anyone you know is in this situation please email me or give me a call. I can let you know if a company is willing to make an offer for consideration.
Not all policies will qualify, but if yours does it may mean that you have the ability to access money you did not think you had and cover whatever expenses are at hand. There is no obligation to accept any offer made.
If you have any questions don’t hesitate to call or pass this email to someone who might benefit.
Paula Straub
www.savegainstax.com
savegainstax@gmail.com
M-F 8am-5pm PST
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html
Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net
Wednesday, February 04, 2009
Tips to Getting Through Tough Times #1
I don’t have to tell you that our current economic turmoil is affecting our lives in ways it didn’t seem possible even one year ago.
Many of the emails and questionnaires I receive on a regular basis are relating to people selling assets at fire sale prices, being foreclosed on, and being stuck in perpetual hold mode due to the lack of credit available to potential buyers.
Worse yet, property values continue to decline, as do assets in stocks, IRAs, variable annuities, life contracts, etc.
The next series of emails will be focused on finding potential sources of income from assets you may own but may be unaware they have additional value.
Even if these options do not apply to you, you may know of someone who can benefit and share this information with them. We are all in this situation together.
First is potential value in a life insurance policy that could provide a substantial lump sum payment in times of need.
If you or someone you know over age 65 is considering dropping or surrendering a life insurance policy because it is no longer needed or if the payments have become too much of a burden to maintain, please have them contact me.
Even if the policy is a term policy with no cash value, there may be value to an investment company who may make a substantial cash offer on a policy that would have been dropped anyway. These companies buy policies and package them in large groups which are resold to investors. There is no single owner with a vested interest in the seller passing on early so this makes it more palpable to the seller.
This is especially valuable to seniors who are afraid they don’t have enough savings to last through their retirement, those who have an unexpected medical or financial setback or those who have no heirs that need the death benefit. It is also a way for their children to have enough resources to take care of them should they need long term care and have no insurance for that. In some cases, additional life insurance can still be purchased with the proceeds.
The policy owner has complete control on whether or not to accept the offer. Not all policies qualify, but I can let you know if yours does when I get some basic information. It never hurts to cover all the bases.
Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858 M-F 8am to 5pm PST
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html
Listen to my weekly radio show “Simply Wealth” at http://www.webtalkradio.net/
Many of the emails and questionnaires I receive on a regular basis are relating to people selling assets at fire sale prices, being foreclosed on, and being stuck in perpetual hold mode due to the lack of credit available to potential buyers.
Worse yet, property values continue to decline, as do assets in stocks, IRAs, variable annuities, life contracts, etc.
The next series of emails will be focused on finding potential sources of income from assets you may own but may be unaware they have additional value.
Even if these options do not apply to you, you may know of someone who can benefit and share this information with them. We are all in this situation together.
First is potential value in a life insurance policy that could provide a substantial lump sum payment in times of need.
If you or someone you know over age 65 is considering dropping or surrendering a life insurance policy because it is no longer needed or if the payments have become too much of a burden to maintain, please have them contact me.
Even if the policy is a term policy with no cash value, there may be value to an investment company who may make a substantial cash offer on a policy that would have been dropped anyway. These companies buy policies and package them in large groups which are resold to investors. There is no single owner with a vested interest in the seller passing on early so this makes it more palpable to the seller.
This is especially valuable to seniors who are afraid they don’t have enough savings to last through their retirement, those who have an unexpected medical or financial setback or those who have no heirs that need the death benefit. It is also a way for their children to have enough resources to take care of them should they need long term care and have no insurance for that. In some cases, additional life insurance can still be purchased with the proceeds.
The policy owner has complete control on whether or not to accept the offer. Not all policies qualify, but I can let you know if yours does when I get some basic information. It never hurts to cover all the bases.
Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858 M-F 8am to 5pm PST
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html
Listen to my weekly radio show “Simply Wealth” at http://www.webtalkradio.net/
Monday, January 12, 2009
TIC Properties in Today's Real Estate Market
We all know that real estate goes up and down in value. Just like stocks, more years are up than down but occasionally we get a market such as the one we are in where it seems all investments are taking a big hit.
So, what is the state of the tenant in common market today? It depends.
It depends on what type of property you own, where it is located, and when you purchased it. Here are some of the factors involved.
Some of the most common types of tenant in common properties consist of shopping centers, office buildings, medical buildings, senior and assisted living and apartments. Most are at least 95% rented when originally purchased.
For years, when real estate values were climbing and the economy going strong, most properties met their expectations and paid out the proceeds as planned.
Now look at what is happening nationwide. Retail businesses are closing and leases are being broken. Large and small service businesses are also shutting down due to the economy. Some parts of the country are worse than others but we see job losses occurring every day. This is not the buildings or managements fault. It is part of being an owner of real estate. It wouldn’t matter if you owned the whole building or a part of it. This will disrupt your profits and income.
Many apartments are doing very well. People losing homes have to live somewhere and often fill up rentals. On the other hand, if your apartment complex is mostly filled with workers from a particular company and if that company is laying off in droves this could affect vacancy rates.
Most senior living and medical buildings are faring well. There is no shortage of aging seniors or people needing medical care. Of course more and more people are losing medical insurance so we may see this have an effect as time goes on unless we get some sort of universal health care open to all.
Commercial property is starting to slide in value and there are more and better deals to be had. The hardest part now for TIC Sponsors is getting the financing to make the purchase and allow exchangers financing in place. It is also difficult to refinance the initial loans that are resetting if the property was purchased 5-10 years ago. Again, this is true for anyone owning real estate and simply part of the risk involved.
The bottom line is that some TICs are underperforming, and some are doing well. There are great opportunities coming along when credit begins to free up. Things will get better, but some values may fall due to unforeseen events beyond our control. Owning real estate means owning the ups and downs of fluctuating markets. Just like any investment, never put all your eggs in one basket and be prepared to weather the storm. This too shall pass.
Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html
Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net
So, what is the state of the tenant in common market today? It depends.
It depends on what type of property you own, where it is located, and when you purchased it. Here are some of the factors involved.
Some of the most common types of tenant in common properties consist of shopping centers, office buildings, medical buildings, senior and assisted living and apartments. Most are at least 95% rented when originally purchased.
For years, when real estate values were climbing and the economy going strong, most properties met their expectations and paid out the proceeds as planned.
Now look at what is happening nationwide. Retail businesses are closing and leases are being broken. Large and small service businesses are also shutting down due to the economy. Some parts of the country are worse than others but we see job losses occurring every day. This is not the buildings or managements fault. It is part of being an owner of real estate. It wouldn’t matter if you owned the whole building or a part of it. This will disrupt your profits and income.
Many apartments are doing very well. People losing homes have to live somewhere and often fill up rentals. On the other hand, if your apartment complex is mostly filled with workers from a particular company and if that company is laying off in droves this could affect vacancy rates.
Most senior living and medical buildings are faring well. There is no shortage of aging seniors or people needing medical care. Of course more and more people are losing medical insurance so we may see this have an effect as time goes on unless we get some sort of universal health care open to all.
Commercial property is starting to slide in value and there are more and better deals to be had. The hardest part now for TIC Sponsors is getting the financing to make the purchase and allow exchangers financing in place. It is also difficult to refinance the initial loans that are resetting if the property was purchased 5-10 years ago. Again, this is true for anyone owning real estate and simply part of the risk involved.
The bottom line is that some TICs are underperforming, and some are doing well. There are great opportunities coming along when credit begins to free up. Things will get better, but some values may fall due to unforeseen events beyond our control. Owning real estate means owning the ups and downs of fluctuating markets. Just like any investment, never put all your eggs in one basket and be prepared to weather the storm. This too shall pass.
Paula Straub
www.savegainstax.com
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html
Listen to my weekly radio show “Simply Wealth” at www.webtalkradio.net
Wednesday, December 31, 2008
Happy New Year 2009
Well, another year down and what a year it was! Unfortunately, for many not such a good year financially.
Retirement accounts, savings, home values are pretty much down across the board. Layoffs are compounding and unless we can get people back to work, more will lose their homes, savings and most likely benefits such as health insurance coverage. None of this is good news and will start 2009 on a down note.
On the upside, we have a new president coming into office, and he has hopefully engaged the right brain power to begin to turn things around over the coming months.
On the upside, if you have a steady job and good credit, opportunities abound with the ability to refinance at a low rate and buy stocks and property at sale prices. If only the majority of people fit into this bracket!
So, my wishes for the coming year are job creations, a consumer confidence rebound, health care reform and not an excessive amount of tax increases. Also, less war worldwide would be a very welcome change.
So all the best for a happy, healthy, and prosperous year ahead.
Paula Straub
Retirement accounts, savings, home values are pretty much down across the board. Layoffs are compounding and unless we can get people back to work, more will lose their homes, savings and most likely benefits such as health insurance coverage. None of this is good news and will start 2009 on a down note.
On the upside, we have a new president coming into office, and he has hopefully engaged the right brain power to begin to turn things around over the coming months.
On the upside, if you have a steady job and good credit, opportunities abound with the ability to refinance at a low rate and buy stocks and property at sale prices. If only the majority of people fit into this bracket!
So, my wishes for the coming year are job creations, a consumer confidence rebound, health care reform and not an excessive amount of tax increases. Also, less war worldwide would be a very welcome change.
So all the best for a happy, healthy, and prosperous year ahead.
Paula Straub
Wednesday, December 17, 2008
What Will Obama Do With Capital Gains Taxes?
Dow Jones Newswire reports that President-elect Obama's plans include:
Exempting seniors earning less than $50,000 from income tax.
Increase the top two marginal tax rates from their current levels of 33 percent and 35 percent to 36 percent and 39.6 percent, respectively. Based on 2009 income thresholds, that would result in a tax increase on singles making $171,550 or more and married couples making $208,850 or more.
Taxpayers in those brackets also face increased taxes because President-elect Obama plans to restore phase-outs of personal exemptions and itemized deductions. This means that high-earners would not only face higher tax rates, but they would also lose some or all of their personal exemptions and itemized deductions.
Obama has also proposed raising the tax rate on capital gains income from 15 percent to 20 percent for single taxpayers making more than $200,000 and for married couples earning more than $250,000 annually.
Of course, nothing is set in stone yet and some of these issues may not be addressed until well into his term, depending on the economy.
We can be sure, however, that at some point the government will have to be paid back for all the billions or trillions of dollars it is spending to stabilize our financial infrastructure.
This will most likely be done through tax increases, so minimizing taxes becomes more important than ever. I’m glad my practice will benefit throughout the foreseeable future!
Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html
Listen to my weekly radio show “Simply Wealth” at http://www.webtalkradio.net/
Exempting seniors earning less than $50,000 from income tax.
Increase the top two marginal tax rates from their current levels of 33 percent and 35 percent to 36 percent and 39.6 percent, respectively. Based on 2009 income thresholds, that would result in a tax increase on singles making $171,550 or more and married couples making $208,850 or more.
Taxpayers in those brackets also face increased taxes because President-elect Obama plans to restore phase-outs of personal exemptions and itemized deductions. This means that high-earners would not only face higher tax rates, but they would also lose some or all of their personal exemptions and itemized deductions.
Obama has also proposed raising the tax rate on capital gains income from 15 percent to 20 percent for single taxpayers making more than $200,000 and for married couples earning more than $250,000 annually.
Of course, nothing is set in stone yet and some of these issues may not be addressed until well into his term, depending on the economy.
We can be sure, however, that at some point the government will have to be paid back for all the billions or trillions of dollars it is spending to stabilize our financial infrastructure.
This will most likely be done through tax increases, so minimizing taxes becomes more important than ever. I’m glad my practice will benefit throughout the foreseeable future!
Paula Straub
http://www.savegainstax.com/
savegainstax@gmail.com
760-917-0858
Fill out a Confidential Qualification Questionnaire and see if you qualify to save capital gains tax. Go to
http://www.savegainstax.com/qq.html
Listen to my weekly radio show “Simply Wealth” at http://www.webtalkradio.net/
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