I have a client that wants to sell but doesn't want to pay a ton of taxes on his
$2 Millon in captal gains. He knows about
his $500K exclusion but what do rich people
do to get out of paying taxes on the other
$1.5K. Any ideas would be appreciated, you don't need to go into detail, just point me in the right direction ( trusts etc. ).
Ted in Salinas Ca.

I recommend that you client see a CPA.

He can check with his tax advisors to verify this. The seller can elect to offer seller financing when he sells his property thereby allowing him to report his gain on an installment sales basis and spread it out over 20 to 30 years if he wishes. This also allows him to receive a fair market value interest rate from the buyer on the amount that he is personally financing---the best of both worlds. Hope this helps!

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Jacky Goff
Residential & Commercial Realtor
Ft Lauderdale, Miami, Palm Beach and surrounding areas in south Florida
Oceanfront & Waterfront Properties

I agree with Jgoff, except I think you have to take the whole gain now since it's inventory. But you can discount the NPV of the future payments (totaling 1.5M) and take a lesser hit in this case.

Definitely, hire a CPA *WHO SPECIALIZES IN REAL ESTATE!!**

I would recommend a 1031 exchange or a TIC. I can recommend a great company for this if your client is interested. Your client's CPA/Attorney may also be able to refer them.

Be well,
Robyn
www.robynhudsonhomes.com
hudson0116@yahoo.com

The legal ways of working around this big chunck of capital gain are already mentioned above. Any other suggestions like doing it like those millionaires way is all up to you. Just like the good old saying, " If it is too good to be true, it's probably is".

Working with an "aggressive" CPA is what I also recommend. This CPA is someone who is experienced enough in this type of transaction.

1031 exchange is also a great way of doing it. But make sure that you use a reputable exchanger like the starker. The IRS is very picky in this aspect, so do it right!
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Your not an attorney nor a tax man.Cover yourself although your intentions may be good and your trying to be helpful.Your crossing into dangerous territory that can bite you ijn the rear end if something should go wrong.You can tell him about your Idea ,but tell him you are not a professional tax person and he will need to seek the advice of a person in that field.Too often we forget that we are not attorneys or tax people and if we give the wrong advice we can be libel.If you know a good CPA you can always refer him.Your Idea is a good one and your client will appreciate your strait forward approach and wanting to help.Help but remain within your expertise and do it well. just my oppinion.

I usually tell my clients that my advise outside my field is free and worth exactly what you would be paying for it.

With similair situations I always refer my clients to a lawyer, then tell them ask about (whatever). I always try to mention a few things they might want to ask the lawyer about when they talk to them.

Ted,
Has your client asked you to help with a sale that will save him the most in capital gains? Does this client have a CFP? Has he talked with his CPA?

one way to pay less taxes is pay your agent a 15 percent commission on the sale of the property.Make sure it gets listed on mls with a 71/2 percent split.You will pay less taxes and make the bauying and selling agent very happy. just a thought.

I would definitely pursue a 1031 Like Kind Exchange. A good route to go is finding a tax attorney who works with 1031s. My mother's law partner is a tax attorney who moderates 1031s regularly. Interestingly, many of these transactions are agentless. Just multiple investors getting together for some action and not inviting Uncle Sam.

With that said, I have never been involved in any of the transactions. I only have been told of them. I believe that it is a dangerous thing to practice outside of ones' expertise.

I am planning on CCIM classes to gain more knowledge on commercial transactions. As, this area of this business fascinates me.

The other big challenge here is if you are not a commercial agent or 1031 attorney, where do you find the inventory? Here in Richmond, good commercial inventory is very limited.

Good luck!

Carter

A lot of agents miss the boat when it comes to exchanges (1031's). It can be a single family that used as a rental, a duplex, or 4plex, anything that one is using as an investment. If one of you target markets is non-owner occupied SFR's, always ask if they are planning on a 1031 exchange.
Doesen't necessarily have to be "commercial" property per se.

The great thing about exchanges, you usually get them selling, and you get 'em buying. Kind of like a double pop, so to speak.

TedStuff-

SEND HIM MY WAY! I'll help him spend his money!

Seriously, what are his objectives?
Does he want cashflow, another residence, investment property, or perhaps a second home?
You really need to find out exactly what he would like to accomplish prior to giving him advice.
Is it his personal residence? Investment property?

I would recommend gaining the assistance of a experienced Real Estate Accountant.